To hit home my point that I believe the online course “Savings Strategy Development” from Next Level Purchasing (now the NLPA, part of Certitrek) is worth the time and investment for a purchasing professional looking to advance her knowledge and career, with kind permission, I am going to dive into a few topics covered in the course that I believe hit home on the importance of a good savings strategy and a well designed course to help you develop one.

The course begins by noting that saving money is arguably the #1 reason for the purchasing profession. Businesses exist to make profit, and that happens when the bottom line is improved. There are two ways to do that. Increase revenue or decrease expenses. Effective purchasing decreases expenses, particularly in terms of cost of products sold or selling, general, and administrative expenses.

The first lesson then goes on to define seven types of savings, including the well understood hard-dollar, the moderately realized but hard-to-calculate payment term savings, and the less common alternate condition savings. It lays out clear calculations for each of these. For example, the proper way to calculate payment term savings, which results when more favorable payment terms are negotiated, as defined in the course, is:

{(New Discount – Old Discount) – [(Old Window – New Window) * (Money Cost/365)]} * Spend

where:

• New Discount : new discount rate offered by the supplier
• Old Discount : old discount rate offered by the supplier
• New Window : new number of days in which payment is due
• Old Window : old number of days in which payment is due
• Money Cost : annual cost of money
• Spend : spend on products and/or services to which the new discount applies

It then clearly defines the difference between quick hit, supplier relationship, and strategic sourcing savings opportunities and defines a methodology for determining what type of opportunity a category represents. It also defines the basic strategies that should be considered for each savings opportunity. For example, a quick hit opportunity generally implies the use of competitive bidding from pre-qualified suppliers who have already accepted a contract template.

Of course, the crux of the course is the ten phase approach to world class sourcing which should be applied as a starting template each and every time you start planning your sourcing – and savings – strategy for a strategic sourcing opportunity. And unlike some approaches that you will discover reading through materials you will find on the web, which tend to focus on the technology and not the core underlying process, it includes due emphasis on a current baseline analysis (phase 2), market survey (phase 4), and success measurement (phase 9). After all, without a baseline, you will not be able to measure your success, which is key to establishing your worth, and that of your department and profession, as a procurement professional, and without a decent understanding of the market, it will be hard to determine reasonable goals, objectives, and the magnitude of your success. (A price concession in a tight market where suppliers generally have more bargaining power is a bigger win than a price concession in an open market where supply exceeds demand and suppliers have little bargaining power.)

I hope this gives you some more insight into the importance of continued education and appropriate courses for your development and why I believe “Savings Strategy Development” from Next Level Purchasing is most likely worth your time and investment as a procurement professional.

Last weekend I audited the online course “Savings Strategy Development” from Next Level Purchasing (now the NLPA, part of Certitrek), a course designed to introduce you to best practices that you can use to craft a top-notch savings strategy.

According to their website, this course is designed to help you learn a systematic method of establishing a cost savings strategy in your organization. In addition, you will learn how to identify sourcing and savings opportunities by analyzing your spend, plus…

• How to define several types of savings and avoidances
• How to create or improve a commodity classification system that optimally supports sourcing and savings initiatives
• How to find and take advantage of easy cost savings opportunities
• How to achieve cost savings by leveraging existing supplier relationships
• How to negotiate savings without straining a supplier relationship
• How to diligently manage costs by utilizing the Producers Price Index and developing your own Supplier Price Index
• How to get everyone to apply the same, proven approach to cost savings by implementing The Ten Phase Approach To World-Class Sourcing
• How to track the progress of your sourcing strategy
• How to determine a methodology and strategy when writing an RFP
• How to write an RFP that is aligned with the final contract
• How to write an RFP that achieves the perfect balance of standardization and customization
• How to write an RFP that is aligned with evaluation scorecards
• How to write an RFP that ensures equitable (“apples-to-apples”) supplier comparisons
• How to write an RFP with an optimized supplier response format
• How to report cost savings in a way that will be embraced by executive management

Like the last course I reviewed, it also lived up to its promises. In addition, it also:

• clearly differentiated savings, avoidances, and false savings to help you report your achievements in a clear, correct, and effective manner
• provided easy methods you can use to determine your bottom line impact on your organization’s income statement
• detailed formulas you can use to precisely calculate your hard dollar savings and cost avoidances
• outlined the seven core components of any good savings strategy
• provided a simple introduction to basic spend analysis
• clearly documented all of the groundwork that needs to be done at the start of any successful sourcing effort
• offered sound advice on how to avoid bottlenecks that can hinder your efforts and prevent you from reaching your goal quickly and efficiently
• identified different types of savings opportunities that can result from collaboration
• offered sound techniques for effective negotiations
• described techniques for an effective market survey, a critical step before RFX distribution

So, is this course also worth it? Absolutely. Not only would it take you days to attempt to amalgamate all of the content you would need to match this course, and weeks to extract and absorb the relative material, but it could take you (significantly) longer still to put together an equivalent ten phase approach that could be as successful as the one outlined in this course. (And, like the last course, it is another step in the completion of the certificate program that is likely to lead to a salary bump that is multiples of what you invest.)