Change Management: The Key to Unlocking Procurement Savings

Companies are spending millions on procurement savings initiatives in order to drive improvement to the bottom line. Buyer and supplier enablement is one of the most critical links between sourcing initiative and measurable bottom-line savings.  This process includes connecting buyers and suppliers electronically and aligning business processes between vendors and buyers.  This alignment is critical to ensuring that both parties can do business efficiently and effectively.  The last critical step in achieving measurable cost savings is driving desired end-user behaviors.

Strong and sustained user compliance rates of 80% and higher will ensure maximized cost savings. The most successful programs have the following characteristics:

• Strong executive commitment
• Targeted communication strategies
• Company-wide user involvement
• Comprehensive user training
• Compliance programs that phase out incumbent suppliers

Making the Case for Spend Analysis

Getting a handle on procurement spending isn’t easy, but it can pay off in many ways. Spend analysis and the resulting opportunity to participate more efficiently in purchasing decisions can pay off in the long, run even if the up front costs are significant.

A good place to start is with an audit of existing purchasing data. Look for invoice duplication, overcharges, and transactions that are contractually prohibited.  Initial savings can bolster the case to bring in new software to better manage and analyze spending. Forcing all purchases, including Pcard,  to go through a PO system doesn't necessarily, solve the problem, but the purchasing group needs to be able to better see the spend in an easier and more complete fashion.

Some of the solutions available include:
SAS's Supplier Relationship Management
i2 Technologies' Strategic Sourcing
Oracle's Purchasing Intelligence
Ariba's Spend Management Solutions

Best Practices in Telecom Spend Management

The challenge: few enterprises have a detailed understanding of how much they’re spending on telecom equipment and services or with whom they are spending these dollars. The reason? Telecommunications services purchase decisions are widely decentralized and poorly controlled at most companies.

In fact, a June 2004 Aberdeen benchmark study of telecommunications spend practices of 115 enterprises uncovered the following:

• 7% to 12% of telecom service charges are in error. For large enterprises, such errors are costing more than $8 million a year in lost profits.

• Up to 85% of a typical enterprise’s telecom bills are not audited and are simply paid in full. For bills that are validated, billing analysts most often examine just a subset of invoices associated with the largest spending.

• There is a lack of insight into telecom spending. Forty-five percent of companies are actively managing less than 50% of overall telecom spending.

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