Have you ever wondered why your savings projections supersede the realized savings? Have you ever been challenged by your finance department to validate the projected cost savings one year into an agreement? Has your C-suite ever complained that procurement’s estimates and projections go unrealized? If you have faced any of these or similar situations, you are not alone. Savings projections often fall short of reality, but why? For many procurement organizations, their sourcing efforts aren’t felt due to noncompliance.
This post was written by Michael Hinkley, an intern at Source One Management Services. If you are interesting in hearing his perspective on procurement as a career and as a part of the larger business, click here to listen to our conversation on BMP Radio.
Whether you’re preparing for a sourcing engagement or looking to improve supplier relationships, effective forecasting and planning is key to staying ahead of your supply chain and formulating a procurement blueprint. When buyers and sellers aren’t on the same page about expected volumes, usage schedules, and run sizes, both may experience surpluses or shortages. This, in turn, can lead to dire consequences for operational efficiency and the bottom line – yours and your suppliers’. For instance, the over unitization of warehouse space, as a result of a constant excess of inventory, will lead to increased effective unit prices. However, with accurate forecasting and improved supplier communication, you not only optimize your internal processes but allow your suppliers to run a more efficient operation with better turnover rates and proper resource allocation.
In this Procurement on YouTube post, we will hear from Mikkel Larsen, Strategic Programme Executive at Rolls Royce. He recently gave a presentation at ProcureCon on ‘Focusing on the big wins and sustainable outcomes: using demand and specification management as the key tools in meeting tough savings targets’. When he talks about sustainability, he means lasting results through meaningful change versus environmental sustainability. In this clip, he describes the importance of reducing costs through demand and specifications as opposed to just consolidating volume for pricing leverage, bringing suppliers and internal stakeholders actively into the process to collaborate on a meaningful solution.
This week’s Wiki-Wednesday article, ‘Shape Demand… For Services’, looks at the challenges procurement organizations face as they work to address internal demand for services. As an increasing number of non-core functions are handled by third parties, it is important to consider the management of this spend as the outsourced category model it is.
Have you ever felt you could predict the future? Have you ever been thinking about someone and then the phone rings and it is that person or you bump into them in the store suddenly?
BMP viewed Gartner’s recent webinar, “Supply Chain Excellence: how to Reduce Costs and Improve Agility in 2011”, on February 3, 2011 and took the following notes.
The complete archived webinar is available on their site and can be seen (after a quick registration process) by clicking on THIS LINK.
Allow yourself more than the literal time of the webinar to review the presentation materials. Some of the graphic slides are very dense, but are well worth the time to pause the webinar and absorb the content.