From Ideas To Savings – Chapter 3
12 December 2016
From Ideas To Savings – Chapter 3
In this third article of our series “From ideas to savings”, we will continue the journey and look at how you can plan and manage your cost reduction projects.
Chapter 3, part 1 – Planning
So, now that you have completed your inventory of opportunities it is time to plan them. And this is where the sourcing pipeline will help you.
Just like sales people have their sales pipeline, buyers should have their sourcing pipeline.
As usual, there are 3 ways of doing this: the Excel way, the over-engineered way, and The Right Way ®.
The Excel way is the way in which 80% of procurement professionals manage their sourcing pipeline. It (somehow) works but is far from optimal.
The over-engineered way is the way in which people do it for when they tackle the problem with an internally developed solution. For sure it is customised to their needs, but that is the issue. It will integrate all the quirks and layers of complexity that have been accumulated over the years (and we don’t mention the fact that if anything goes wrong and one day it will go wrong…you’ll need to ask your IT team for help. Which will be prioritised right after the work on the CRM. And the plant management software. And the ERP. And whatever tool someone close to the CEO has…).
Fortunately, there is the right way, a sourcing pipeline management tool, where you can register your projects in a simple way:
- What is the project about (this includes Who will do it and Where it will take place or have an impact)
- How much is at stake
- When it will take place
All the rest is possibly TMI (Too Much Information) and will add more friction than rather value to the project.
Once you have logged all your projects, set the targets (and hopefully locked them), you can start working.
And this is where a proper tool is useful once again: to understand what the current progress is if there are any issues or a bottleneck in the process.
Let me make the comparison with sales one more time: a sales manager cannot manage his team if he doesn’t have a clear, consolidated, up-to-date view of what their team members are up to. And if it takes you more than 1 minute to get this, then you are doing it wrong and wasting time.
Pipeline Management and Savings Tracking
With the wealth of procurement tools available on the market, there is an area that is seldom mentioned but that remain an Excel stronghold: the sourcing pipeline.
Most of the Procurement organisations we meet still have an Excel file on some network drive where all the projects are listed, sometimes with targets, and often with an indication of the results (savings, eh?).
Even though anyone can create an Excel sheet, the challenge with this approach is that it can be a painful and reactive way of managing the project that you have spent so much time identifying and planning.
A SaaS solution such as Per Angusta will make it easy for the buyers and the managers to capture projects progress, results and have it consolidated in real-time, without the hassle of wondering if you have updated the right version of the spreadsheet or if no formula has been overwritten that will break the consolidation mechanism (macros anyone?). Best of all, all the reporting is done automatically and you actually have the information to anticipate any deviation to the plan.
Stay tuned for the Second part of Chapter 3, discussing how to understand your categories and potential savings