There are many ways to improve savings enablement that involve focusing on the right strategies and tactics to enable cost savings. Out of our recent survey results, 55% of Procurement and Finance professionals expect a recession before the end of 2020. They are also likely to be the first to deal with the impact of a recession in their organizations. We’re going to look at some of the top ways to reduce cost and risk. Doing this will make your enterprise “recession-proof” enabling you to minimize savings loss and avoid business disruptions in the face of economic slowdowns.
#1: Prepare a strategic plan for cost savings in times of economic need
We recommend an always-on systematic approach to managing spend and margins. To do this, Finance and Procurement professionals need to examine spend categories and supplier’s stability, and be aware of upcoming contract renewals. It can also be helpful to closely scrutinize which suppliers are garnering the most spend to see if those can be cut or reduced. The top-tier suppliers examined are usually the handful or dozens of suppliers that are generating 40% of spend.
#2: Tighten scrutiny of your ‘Travel’ category
Travel is one of the top-identified areas by Procurement teams (60% of our survey respondents marked it as their #1 area) of high expenditure. It’s often the go-to to category for quick impact of high cost savings and behavioral change. When pressed to find savings in this category, many look into contract negotiation and vendor consolidation. (Other industries may rank other spend categories higher, like Manufacturing wants to delay project expenditures and Retailers focus on scrutinizing PO approval).
#3: Reinvest for the long-run and bolster the bottom-line for the short-term.
Among large companies with revenue over $1B, savings most typically goes straight to the bottom line, as cited by 74% of survey respondents. Reinvestment in longer term projects and within department budgets are the second most typical, cited by 57% of respondents, as well as reinvestment and partnering with strategic suppliers or innovative suppliers.
#4 Establish cost-savings goals at the beginning of each fiscal year
Nowadays 8 out of 10 companies have savings goals and most aim for a 5-14% increase in savings. Amongst survey respondents who did not have a goal last year, 28% are establishing one for this year. Larger companies (those with more than $1B in annual revenue) are far more likely to have cost-savings goals in the range of 5-9%. They’re mindful of potential impact to their budgets and headcounts, and put more weight on these two things than they do on losing suppliers or issues about suppliers’ business continuity. The goal is to avoid the dreaded layoffs and budget cuts as these are things that directly impact individual departments the most.
By using these four cost saving strategies to take a proactive approach to spend management and obtaining full visibility into your procurement process, departments can eliminate unnecessary expenditures and bolster their bottom line.
Get Ahead of Your Cost Savings Plan for 2020
Suplari can help track spend and streamline sourcing processes for greater cost-savings potential. With customizable AI-driven Insights, a simple and easy-to-use interface, and the ability to gain 100% spend visibility – Suplari is the perfect solution for small teams with big goals. Contact us today for a demo!