Are you getting enough?

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A typical cost reduction initiative may yield reasonable results short-term. But if they are not managed by experts, savings can be eroded surprisingly quickly.

Could you get more savings and sustain them for the long term?

 

Too often, organizations recognize the need to reduce their spend on indirect costs and overheads; they initiate a cost reduction project, find some savings and believe the job is done.
You can do better. When you find savings and have experts monitor each spend category, you save more and continue to realize the savings every year. This diagram illustrates the difference between unmanaged spend (which may be reduced temporarily with a cost reduction initiative) and spend that’s managed continuously.

The ‘unmanaged spend’ on the left of the diagram shows the typical result of a one-off cost reduction project. The organization finds savings, but they are diminished because vendor charges are not monitored and purchases do not adhere to the organization’s policies and procedures.
On the other hand, when category experts manage indirect spend, an organization achieves greater savings and sustains those savings into the future. Category experts can add value in a number of ways:

• They thoroughly analyze existing expenditure, going through orders and invoices and comparing line item details with the best rates in the industry. This increases an organization’s ‘spend visibility’; it reveals what purchases are made and how.
• They use expertise and industry knowledge that’s typically not available to an organization. They are industry specialists, dedicated to reducing costs in a single cost category. Their focus is not compromised by other tasks.
• They constantly track the prices their clients pay and the service they receive. Their expertise is known to vendors, so they have the authority to recover overcharges and ensure that clients receive best value.
• They oversee the purchases their clients’ staff make and ensure that they adhere to established policies and procedures.
• Perhaps most importantly, they monitor the solutions they have recommended for clients; their management reports make it easy for clients to see the savings they have achieved and how they will affect the organization’s bottom line.

If your indirect spend is currently unmanaged, you’re probably not getting enough from your cost reduction efforts. It could be time to seek help.