Per Angusta Blog
5 December 2016
From Ideas To Savings – Chapter 2
In this second article of our series “From ideas to savings”, we will explore how you can refine the raw idea and decide if an opportunity is worth pursuing.
This is the second part of a series #From Ideas to Saving, you can catch up on Chapter 1 here.
Once you have identified a bunch of opportunities, you have to do a little reflection and cleansing… let’s call it a reality test.
Because all opportunities are not created equal you need to separate the wheat from the chaff.
There are a few things that can help you decide what opportunity should actually become a project:
- What is the effort-to-benefit ratio of the opportunity?
- Does the opportunity support the business and is it aligned with the strategy of the organisation?
- Do you have the resources to deliver the project?
- And we cannot ignore politics: sometimes, even though an opportunity is fantastic, someone higher up will ask you to let it go. It’s possibly the most frustrating side of our jobs, but it is a fact.
More broadly, a category management approach will do a large part of that work. To this, you will need to ask yourself, do you know the historical and forecasted spend in a category? What’s the current state of the market and how many suppliers are there in the market that can facilitate your demand?
Here, you have many options at your disposal. Tools which offer spend visibility solutions can come to your rescue and present a clear as well as accurate view of your spend. Categorised according to your own Procurement taxonomy (not a chart of account) and with the spend attached to the proper vendor or vendor group.
Some solutions will come in a fully managed from, others will simply need more human intervention. In any case, it’s a must-have.
Alternatively a low-touch approach where you register opportunities and assess them on a few basic criteria, such as what will they contribute to the bottom line, how long will it take, how difficult will it be? Afterwards, you simply need to do the simple process of organising a review, rejecting opportunities and promoting opportunities to projects in your pipeline.
If the simple process isn’t for you, then you can take the much more thorough approach and dive deep into the analysis. This might be right in the case of complex categories, or if you’re in an organisation that doesn’t get anything done without the proper data and factual analysis.
Once you’ve done that it’s time to start the planning, understanding how and when these projects will take place during the year… and actually start contacting those vendors!
Stay tuned for the First part of Chapter 3, where we will discuss how to plan and manage your cost reduction projects.