Vendors and Consultants are but a small portion of the industry, and the economy … as Buyers, you work for organizations that compose the majority. The only way we’re truly going to get back to business-as-usual is if you use the vision provided by the vendors looking ahead to solutions (and not looking back to outdated manuals or just offloading their work to hallucinatory Gen-AI LLMs) to identify what clarity you need, bring in consultants to help you realize it (and the significant ROI that accompanies it), and then use your newfound “savings” to procure the best-of-breed sourcing, procurement, and supply chain visibility technology offered by the visionary vendors, as this is the technology that will help you increase productivity and significantly reduce your costs across the board and survive the AI Hype Induced Market Crash to come.
We don’t know how bad the crash is going to be, and it might be a long road to recovery that requires a significant effort and initiative on your part (depending on the size, complexity, and focus of your organization), but the starting point is clear. So here’s a simple step-by-step guide to get you on the right path.
- Do a real process and spend analysis.
- Bring in process and category experts to get you real time savings on your most time-consuming processes and your most profitable tier-1 categories.
- Implement workflow and process orchestration and e-Procurement systems to realize the savings.
- Adopt e-Sourcing to streamline and maximize the savings potential on your tier-2 categories.
REAL ANALYSIS
We’re not talking about a simple time tracking exercise on a step-wise basis based on progression points, we’re talking about real end-to-end process analysis in terms of how much actual human time is spent on each step (not just when the steps happen), why, if the process can be redesigned to take out the time-consuming steps, and, if not, if the steps can be redesigned to take less time. It’s about real efficiency, not just a bit of streamlining with thoughtless automation.
And we’re talking about real spend analysis — not just loading your AP data into a UNSPSC cube and running out of the box reports on your top 10 vendors, top 10 categories, and top 10 departments. Even if you don’t know the exact amounts, a simple internal survey will tell you those with uncanny accuracy. And it’s definitely not throwing random spend data into your LLM of choice and asking for it to find “savings”. That’s just going to run the same dumb reports and give you the “obvious” recommendations that you already know, and that for one reason or another, you can’t do because of existing contracts, specific product needs, etc.
We’re talking about loading all of your spend-related data -— AP, Invoice, Contract, Third-Party Price Indices, etc. — in a real spend analysis product that will let you slice and dice it any way you can think of so that you can identify (a) where you have made overpayments and extract refunds and (b) identify the top categories with with the most savings potential. If you haven’t done this before, you’ll want to bring in an expert. There are a few providers in this space that typically find tens of thousands, and sometimes hundreds of thousands, and occasionally millions, of dollars in overpayments within a day. The ROI is well worth the investment.
CATEGORY EXPERTS
This is especially important in categories like energy, telecommunications, utilities, and SaaS that require significant expertise that you might not have. While you might be able to negotiate a 15% cost decrease in a buyer’s market if you’re well informed, a seasoned veteran who has been negotiating these deals day in and day out for a decade (or two) will find a way to save you 30%. And when many of the firms will work on contingency, i.e. you don’t pay until the new contract is cut for an amount less than what you’re paying now, the ROI will be significant.
IMPLEMENT MODERN E-PROCUREMENT
Up to 60% of negotiated savings never materialize at many companies. If you don’t implement state-of-the-art end-to-end e-procurement systems orchestrated with your sourcing, supplier, and supply chain solutions, with price control capabilities (contract integration, punch-out price verification, authorizations for off-contract spend), you too could lose 60% of the savings you negotiated.
ADOPT NEXT GENERATION E-SOURCING
While you’ll still want to bring in the big-guns for the big savings opportunities, as the ROI will be many times what the big-guns cost you, there will be a large number of tier-2 categories where the savings opportunities, though substantial, won’t be as significant if you have to pay high-powered consultants. These are the categories where you get your best returns if you can run the events quickly, and efficiently, in house. And this is what modern e-Sourcing execution platforms allow you to do … especially on categories where you need to go back to market regularly because the volatility is too high to risk long term contracts.
The key is a modern sourcing execution platform that will let you incorporate the right amount of automation, market intelligence, optimization, analytics, and suggestion. It’s all about allowing the buyer to spend just the right amount of time to extract the value and not a second more.