If you haven’t had the opportunity to check out Grosvenor Management Consulting’s recent article in PASA about the four spend levers, you should. It is a concise summary of the opportunity for procurement professionals to find savings beyond the seemingly endless push to simply “pay less” for goods & services.
The article discusses three additional spend “levers” that appear straight-forward on the surface but seldom get the attention they deserve, let alone reach the point where they become ingrained in corporate spending culture.
We found the article particularly interesting as it aligns nicely with the functionality of Simfoni as a tail spend management software.
The first strategy is to “Buy Less” which, as it sounds, is about implementing strategies to reduce consumption. If this strategy sounds familiar it might be because you implement it in your own home. Certainly, it’s the norm for bootstrapping startups and self-funded entrepreneurs, and a staple of all “lean startup” literature. Examples of this strategy may include video conferencing in lieu of travel, scanning and emailing items as opposed to courier, or using the ink saving mode on all corporate printers. In all, these changes might seem like a small gesture, however the Grosvenor survey indicates some sectors could stand to make an additional 148% of savings using this tactic alone. After all, those lean startups can’t be all wrong.
Understanding consumption with low value spend is particularly difficult without proper systems as, by definition, the dollar cost of a single order is too small to attract attention. Simfoni addresses that problem by funnelling all tail spend through a single application enabling procurement specialists to identify trends and aggregating costs – insight that can drive new cost control strategies.
The second lever is to “Buy Cheaper”. As much as we all like that brand new iPhone, the window seat in business class or box seats to the game to entertain clients, the same result can often be delivered by an older version smartphone, less comfortable seats or obstructed sight-lines. Think everyone in the office will stop drinking coffee if you replace the Starbucks premium blend with store bought joe? There may be some groaning, but you can rest assured everyone is still going to get their morning caffeine fix. Respondents to the Grosvenor study reported 113% additional savings from similar tactics alone. Just don’t expect to keep all your “high-society” friends.
This “Buy Cheaper” lever is core to how the Simfoni app was built. By ensuring all purchases (especially the low value ones) receive 3 quotes, users have the visibility of alternatives and can decide for themselves whether they really need all the bells & whistles or whether a lower spec item can suffice; remembering that their consumption preferences are being monitored by the procurement team provides the social pressure needed to ensure responsible spending.
The final alternative approach is to “Buy Smarter”. Perhaps the least obvious of the three levers, it focuses on re-thinking your purchasing processes to find savings. Recently, a colleague was bemoaning the cost of printing sales collateral as it seemed to become obsolete the day after it was printed, resulting in significant wastage. After review, it was less expensive to provide the sales team with tablets to share digital sales collateral that could be emailed to prospects for further review.
Buying smarter also relates to finding new approaches to managing suppliers and streamlining purchasing processes for savings. Simfoni approaches this lever by routing all spend through the platform which, in turn, automatically channels that spend through the company’s eProcurement system. Thus, eliminating bureaucracy and significantly lowering the cost of processing invoices.
While all three of the above techniques seem basic in theory, Grosvenor suggests that they are not getting the attention they deserve. Companies continue to focus on getting the best price through tenders and volume discounts rather than maximizing the benefit to be gained from all four spending levers.