7 Fresh Ideas to Generate Procurement Cost Savings

January 31, 2022

As a purchasing group, we are continually investigating, interacting with and meeting new suppliers and industry experts who have proven they can impact a business in a very positive way. Many of these suppliers have new and innovative approaches to old problems, and some are meeting new challenges head on.

As we move into 2022, now is a great time to share these fresh and interesting opportunities that may have a positive impact on your business.

Some strategies include an example, but company names have been removed to respect clients and vendor’s privacy. These strategies don’t belong to any one specific organization, but can be used by multiple organizations.

 

1. Marketing Strategy Assessment

Based on our experience, organizations use many suppliers and spend hundreds of thousands of dollars on marketing and sales strategies. Some of those strategies are effective, some are not.

We became aware of services that will come into your business, assess your marketing and advertising suppliers, your spend and your advertising and marketing strategies in an effort to establish a more effective marketing strategy that goes after your best demographics.

The premise of this service is that many organizations have a very disjointed marketing strategy, executed by a number of individuals that may ultimately sub-optimize your marketing and advertising budget, costing you significant dollars and not producing the leads you need to generate additional top line revenue.

This proven approach has yielded success in finding the right customers, targeting them with a coordinated campaign and driving new traffic and sales. The start of the year is the perfect time to seek out an organization that can provide a marketing assessment of your current efforts to make a better plan for the coming year.

 

2. Shop Supply Strategy

There are hundreds of shop supply companies out there today that have a range of products and capabilities. Some sell supplies from their truck, others come into your organization, take inventory and place orders, which can be a costly approach.

An organization with a long pedigree in the shop supply world is now making significant progress in the auto dealer space bringing high quality products at highly competitive prices, with a business model that is very different from the current vendor managed inventory (VMI) model. This supplier business model is based on the notion that the customer places their own orders via the internet for the products they need rather than rely on a supplier representative to perform that function.

By taking the middleman out of the equation, inventory levels can be reduced and costs decrease, reducing your overall shop supply expense.

 

3. Compliance & Manufacturer Incentive Audits

Your organization can lose money in several ways if incentives are not properly administered or applied for. An effective Incentive Management Process consists of three parts, including compliance, application and training. The Incentive Management Process is a risk mitigation strategy that is having success in organizations by ensuring that your deal jackets are correct and that your documents supporting incentives are complete and in compliance.

Incentive documentation must be accurate, complete and well documented to support audits and to ensure that incentives that are due to your organization are in fact obtained in a timely basis.

This service can save you money if an audit is scheduled and it can also help your organization achieve incentive payments that have not been applied for.

 

4. DMS Audit Services

The DMS monthly invoice can be a challenge for most organizations to decipher and review prior to payment. Many dealers implement their own detailed reviews of the DMS bill to ensure that they will are charged accurately for all line items. Many dealers, perform no audit of the DMS bill at all. Additionally, many dealers have learned that not all functionality that they signed up for is actually being used within the organization and there may be an opportunity to shut off that functionality and reduce costs immediately.

A DMS audit service is a service designed to verify invoice compliance with current contract rates, and can be expanded to include a review of internal use of DMS functionality and usage. An audit of the DMS invoice against the contract can reduce costs and provide some peace of mind that a high cost spend category is being managed appropriately.

 

5. Energy Management Services 

In certain parts of the U.S., energy is deregulated and can be shopped for competitive pricing with price guarantees fixed over time. An energy management organization tracks the markets with sophisticated energy tracking software and makes buy recommendations based on trends and current market activity. This group focuses on the bid process, which is based on market timing using established management protocols. This organization can serve as a buying group for large organizations with large energy needs, or pool many smaller companies together to form a buying group at a different level.

Energy is currently deregulated in the following states: CA(lottery), TX, IL, OH, PA, NY, NJ, MA, RI, CT, MD, and District of Columbia. Energy costs can be a significant hit to the expense line and exploring all options and tweaking an existing strategy, if one exists, can often pay dividends.

 

6. Identity Verification

 Theft is an issue in most industries, but as an example: car dealers frequently hand thieves the keys to a car and watch them drive away. A new, very low cost solution has emerged that will protect dealers from criminals posing as car buyers. This simple solution uses a scanner that quickly and accurately authenticates a customers’ driver’s license and exposes fraudulent photo I.D.’s. if your dealership or dealership group is experiencing losses from these activities, this solution can reduce your losses with a small monthly investment in equipment and software.

Similar solutions exist for other industries – it’s worth taking the time to reach out to an organization that specializes in theft reduction for your industry to see if there are improvements to be made in your processes.

 

7. Expense Management Reporting Tool

An aggressive expense management strategy depends upon the right information to measure performance and progress against plan. Ideally this information will be detailed at the supplier level rather than just at the G/L level, so management can dig deeper and develop the appropriate strategies.

There are proven tools for executive management to view vendors by department with general ledger lines, complete with month to date and year to date detail. These are known as expense management reporting tools. These tools provides key performance indicators displaying business exceptions for every area of the organization, plus consolidated financial and operational reporting.

This information can be vital to an organization intent on managing expenses and managing improvement strategies.

 

Final Thoughts

Most organizations are top line, revenue focused machines. Finding new sources of revenue and new processes and tools to increase top-line sales could be a full-time job with all of the options in the marketplace today. The same can be said of cost reduction ideas and the various strategies used to reduce, manage and sustain cost reductions in over 100 expense categories.

Risk mitigation is an important consideration in most organizations given the regulations, assets and overall exposure a company has in the marketplace. Tapping into new thinking, reviewing new solutions to old problems can yield significant impact to top line revenue generation, bottom line profitability and overall risk mitigation.

If you want to expedite the process, using a tool that has already vetted vendors will save you valuable time doing research and negotiations.

 

ExpenseEDGE – The Purchasing Department for Your Business

Designed for professionals whose time is limited and for whom expense control is imperative. ExpenseEDGE subscribers have access to a highly-trained purchasing team performing category research, quoting, analyses, and negotiations so you don’t have to.  With continually updated data and solutions, you are guaranteed aggressive market pricing and a competitive advantage.

Strategic Source offers procurement solutions, business spend management, and tactical sourcing to help businesses reduce costs. We understand the difficulties of choosing suppliers and managing vendors. Whether your business needs self-service digital solutions or complete spend management, Strategic Source can help. We deploy a wealth of experience and support for less than the cost of maintaining a purchasing organization.