The executives in companies across the world look to their Procurement Departments to do two things simultaneously: provide the organization with goods and services with a minimum of fuss and save money.
Let's focus on the latter today. What are some ways to generate cost savings? There are several and all sourcing initiatives should be a combination of them.
Vendor Consolidation: Fewer vendors means more volume with the remaining vendors and volume discounts. Consolidation also creates soft dollar savings by reducing work for other departments such as Accounts Payable and Receiving.
Substitute Products: Do you really need Scotch tape from 3M Company (MMM) (admittedly, everyone loves it) or will the Office Depot (ODP) brand work just as well?
Contract Prices: You can lock in lower prices on items by agreeing to an exclusive or semi-exclusive relationship with a vendor for a certain amount of time.
Switch Vendors: If it is time for a complete overhaul of the commodity, start the RFP process and be sure to include the points mentioned above.
Nice job, Matthew. To realize that procurement effectiveness doesn't have to be complex nor tied to the latest, sexiest technology is a key thing for buyers to understand and you got that across to them with this post.
Posted by: Charles Dominick, SPSM | September 21, 2006 5:16 AM | Permalink to Comment