A group of activities that come under the forecasting savings in procurement are related to the savings management. There can be savings mapping to budget, strategic sourcing plans and the tracking of the savings realization (the savings that actually happen after following a particular procedure). The saving projects and the realized savings are mentioned and included in the savings management.
What happens when collaboration lacks between finance and procurement?
- Tracking forecast, realized savings, cost savings becomes difficult.
- The impact of the cost savings cannot be mapped properly.
- Savings are not recognized by finance as reported by procurement.
- The alignment between the procurement and the performance objectives cannot be found.
How savings management will come to your rescue?
The needs are met by providing the necessary information or data. It is a process that helps in various ways:
- The impact of the procurement savings can be easily known and the calculated result is prepared on a sheet or chart.
- The existing approved workflows are automated and mapped, promising the perfect synchronization between the finance and procurement.
- There is clear visibility and transparency in the forecast and the savings achieved. This is done by the maintenance of truth in the information gathered.
Let’s have a look at the features:
- The saving management prevents fraudulent activities in the firm by keeping a check on any other unwanted involvement.
- The forecasting report of the savings is prepared after the realization of savings is done. It is then properly mapped to avoid any confusion.
- It is simple and flexible to present an individual’s data to a company’s data.
- The savings generator is turned on and more opportunities of savings become clearly visible.
- The record of savings is managed in multiple ways. Time, date, quality, quantity, transactions and returns, every minute detail is presented in the chart prepared afterwards.
How savings management works under competitive conditions?
Different areas are taken into consideration:
- Bid price of the firm is deeply influenced by the firm’s perception of its competitive position. If the firm itself plays the role of the system developer, then the bid price opt to be high. Bid prices drop down if the other companies produce the item at low, moderate or high production prices. High wage rates can solve the problem of low bid price under these conditions.
- The contractor’s assumption about the technical risk impacts the bid price. A good TDP in that case lowers the ultimate price.
- There are some fixed type contracts which in large number lowers the price.
- Higher capital investment rises the price while the use of government furnished equipment can generally charge a lower price.
- The desire of the firm to maintain a blend of government and commercial can has its positive as well as negative influences. When minimum returns are gained from the objectives of investment, this leads to rise in the price of production.
Savings management is thus very essential solution for all the drops and downs that create disturbance in the economy of the firm.
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