Gary Preysner shares a co-authored company article that identifies the key questions that should be asked before launching a sourcing project that will save money.
Saving money on purchased expenses is one of the quickest and least intrusive ways to improve your bottom line. Strategic Sourcing has proven to be an effective method of achieving cost savings time and again over the last 30+ years. However, not all vendors and spend categories are candidates for Strategic Sourcing at a given moment.
Here are some key questions that you must ask and answer before launching a Sourcing project, targeted negotiation or other cost reduction effort with vendors:
7 Questions That Let You Know Whether to Source, or Not to Source
- What is your purchased expense base, in aggregate and by vendor?
- Is your purchasing centralized or disbursed among the various functional departments?
- Do you know how much you spend with your top 10 vendors, and what you buy from them?
- Do you know what your 10 highest spending categories are, along with how much you spend in each of those categories?
- Are the spending categories that you believe to be candidates for Strategic Sourcing or other Spend Management methods commodities or are they specialized goods and services?
- Are strategic vendors and commodity vendors understood and treated differently?
- Are Operating and Capital Expenses reviewed similarly?
Do you have contractual constraints regarding any of the vendors / spending categories under consideration?
If so, do you know when the contracts expire / what the termination provisions are?
Have you developed a complete contract inventory to assist in managing your procurement schedule?
Have you sourced or negotiated with the vendors / spending categories recently?
If so, when was it, what process did you use, and what results did you achieve?
Read the article, 7 Critical Questions to Uncover Procurement Savings, on IronwoodConsulting.US.