Spend management is one of the most important steps in any company’s spend planning process. It can make or break your business. If you’re not managing your spend well, then you may end up with too much inventory and unsold products rather than having enough on hand to meet customer demand.
Define your category strategy.
The next step is to define your category strategy. This means identifying the drivers that will propel you forward, as well as defining your categories and providing a high-level look at where they fit within the overall portfolio.
For example, if you’re a fast-moving consumer goods (FMCG) company and have identified three key categories—food/snacks, beverages/beverages mixers, personal care products—and two business units that make up each of those categories: snack foods; FMCGs; personal care products respectively. You could also choose to break down these three core areas by geography (e.g., North America vs Europe vs Asia Pacific), supplier (e.g., Nestle vs Unilever), product type (e.g., bottled water vs soda).
Implement sourcing process improvement
- Implementing a sourcing process improvement program is a great way to increase your performance.
- The first step in implementing a SPIM program is identifying best practices and then improving them.
- A good example of this would be improving supplier quality management, which includes many areas from communication with suppliers, to contract compliance and monitoring financial performance through e-procurement systems like SAP or Microsoft Dynamics 365 Business Central (formerly Dynamics).
- In addition to improving supplier quality management, you can also improve procurement processes such as procuring goods/services at an appropriate price point based on market conditions; creating accurate bids; communicating about bids; negotiating contracts quickly and efficiently using software such as SAP or Microsoft Dynamics 365 Business Central (formerly Dynamics).
- You should also consider implementing new processes like financial management by tracking costs associated with all stages in the supply chain so that you know how much money needs spent upfront versus later on down stream projects once they’re completed successfully
Create supplier scorecard
- Define the problem before you start on a solution
It’s important to define what your goal is, and why. The more specific and ambitious your goals are, the easier it will be to achieve them. For example, say that you want to lose 20 pounds in three months. That’s great! But if instead of losing 20 pounds per month (which would take four years), all you want is an average 10 pounds per month over three months—that’s still pretty good! And since most people don’t expect their weight loss efforts ever end up being as dramatic as losing 100 pounds overnight like some reality TV star did last year…you’re probably not going to get there anyway! So set realistic yet ambitious goals for yourself based on how much time and energy are available for training/motivation/etc., along with other factors such as age where appropriate (older folks have fewer excuses).
Implement supplier consolidation program
A supplier consolidation program is a way to lower your freight costs and improve the quality of service you provide.
Suppliers will be selected based on their ability to meet your needs, as well as their reputation in the industry. The process can take time and effort, but it’s worth it if you want to gain control over your freight costs and improve service quality for your customers.
A good example of a successful supplier consolidation program is described below:
Implement spend analytics and business intelligence program
Provide a business case for creating a spend analytics and business intelligence program.
Provide an example of how you would implement this program in your organization, including the following:
- How will it help improve efficiency?
- What are the benefits?
- Who does it affect (e.g., customers, suppliers)?
Optimize transportation spend
- Reduce the number of suppliers.
- Increase the number of shipments per year.
- Use a third party logistics provider to manage your transportation spend, which can be significantly reduced if you don’t need to ship as many product samples and other small items.
Automate procurement processes
Automation is the process of doing something repetitive, such as purchasing supplies. You can automate procurement processes by using tools that make the process easier and more efficient.
When you automate your procurement processes, you’re able to reduce costs by eliminating unnecessary steps in the process.
For example, let’s say you need some office supplies for your business; instead of ordering from an online store every time (which can be costly), you could use an automated system like Amazon Mechanical Turk or Mechanical Turk Fulfillment Service that allows users from around the world to complete tasks on their computers at home while earning money through completed orders like yours!
Spend management is never easy, but it can be done.
Spend management is a continuous process that starts with defining the category strategy and ends with implementing spend analytics and business intelligence programs. The first step in this process is to define your target customer personas, which will help you understand what they expect from suppliers. Next, you should develop an action plan for implementing spend management; this will allow you to track performance against each metric using both qualitative analysis and quantitative measures such as profit margin or productivity per employee.
After creating a scorecard for each supplier participating in your organization’s products or services (and yes, there are multiple ways to do this), begin consolidating suppliers into groups based on similar characteristics—such as geography or industry—and then implement new processes such as supplier consolidation programs so that all employees know where they stand relative to everyone else within their groupings at any given point during the year.
As we saw, there are many tools and processes that can help you manage spend. So the next time a client asks you to manage their spend, make sure you’re ready with all the best practices in place so that you can get it done quickly and efficiently.