Don’t wait until the new financial year to kick off your savings delivery programme.
For many the beginning of the new financial year can seem like the perfect time to kick off a procurement savings delivery programme; it marks a clear start date from which it is easy to count savings gained. However, it is not easy to make this type of project fall neatly into a set financial year, and often you would be better to start sooner rather than later.
For in-year savings to be maximised the savings delivery programme should start ideally six months before the financial year start date.
On average, it takes a minimum of two to three months to see any initial savings being realised with this type of programme. In fact, it would be realistic to say that it could take six to nine months before all the processes are completed and the savings start to be realised. Therefore, for in-year savings to be maximised the savings delivery programme should start ideally six months before the financial year start date.
Importance of continuous category planning
Along this line, the initial category planning should start well before the beginning of the financial year and should be revised continuously along the programme. This transforms the category planning process from a month’s worth of activity into an on-going process where procurement can be flexible and revise its strategy, adapting the required actions during the programme.
With both Brexit and the recent American election result we have experienced once again how the markets are becoming increasingly volatile. It is also now common knowledge how the rapid developments in the IT world can aide businesses, especially those in the financial services industry. The impact of these developments is significant on supply chains and companies need to adapt to these changes as they happen, meaning that category planning must be agile and shift with the changing requirements of the business.
The initial category planning should start well before the beginning of the financial year and should be revised continuously along the programme.
Category and supplier relationship managers should closely monitor the market developments on top of the incumbent suppliers’ performance and their contracts landscape and continuously reflect these in their category plans. An up to date spend insight tool is one of the key enablers for procurement functions to ensure that they focus their efforts on the correct spend categories.
Monitoring and tracking savings is essential to success
The best way to ensure success in a savings delivery programme is to track the realised savings alongside maintaining the category plans. If the savings are not coming through in a way that can be monitored there is a risk that these savings will not be credited, and it is quite possible that procurement will be blamed. Finance is always keen to see the bottom line impact of the programme – leading to the increasing trend to track the savings monthly, based on each single transaction.
The best way to ensure success in a savings delivery programme is to track the realised savings alongside maintaining the category plans.
My advice: do not wait to kick off your procurement savings delivery programme. Instead, ensure that your strategy setting and category planning processes can adapt to the continuously changing external environment while you track every penny you saved for the business.
Expectations from Procurement are increasing.