Digital Dealer - July 2019 - 7

SIGNIFICANT COST SAVINGS AND INTERNAL
EFFICIENCIES GENERATED ANNUALLY ADDING TO
ENHANCED BOTTOM LINE PROFITABILITY."
5. Supplier Selection -
Preferred Suppliers

Preferred suppliers will
be selected, communicated and utilized at the category level and to leverage
spend, improve supplier
performance, and create
internal efficiencies.
6. Solutions,
Implementation,
and Training

Management will seek
input from category
experts and influencers
for each category, source
and quote the categories according to those
requirements, then make
informed decisions about

supplier selections, implementation, and training as
required.

employees in all locations
to improve communication
and compliance.

7. Compliance

Compliance audits will be
completed in each high-value category to measure
supplier price compliance,
Preferred supplier compliance and use of correct
items or services by internal
employee team.
8. Spend Management
Web Portal

Sourcing plans, supplier
pricing, audits, spend information, preferred supplier
list, contract tracker will all
be available on a web portal
and accessible 24/7 to

9. Research New
Concepts, Ideas,
Best Practices

New category ideas,
research, best practices,
and process improvement
ideas will be made available
to the team via newsletters,
webinars, supplier demos,
and meetings to drive new
savings-profits and new
efficiencies.
10. Management
Dashboard

Key spend data, plans,
solutions, results, audits,
and performance metrics

CHART 2

BENEFITS THAT ARE GENERATED
WITH AN EFFECTIVE SPEND
MANAGEMENT STRATEGY

Research on the benefits of centralization of purchasing or spend management function
is clear from a number of research organizations. Cost savings or new profits equal to
25% of spend can be realized with the centralization process. That does not include the
benefits associated with the reduction of suppliers and the new efficiencies that will be
generated with an optimized, leveraged supplier base. Expected benefits are as follow:

Area

Benefits of Effective Strategy

Costs of Ineffective Strategy

Total Profit Impact

Opportunity = 15% to 25% of spend

Minimal, short-term savings

Supplier Costs

Fewer suppliers, reduced costs

Many suppliers, additional costs

Invoices

Fewer invoices, reduced back-office
costs

Many invoices, additional costs

Supplier Compliance

Price and term compliance measured

Unknown compliance

Price Protection

Sustainable long-term savings

Short-term savings

Business Terms

Quoted, negotiated terms to reduce
costs

No business terms quoted

Processes

Internal and payment processes
reduce costs

No process focus

will be available on a
spend dashboard through
the spend portal.

ANTICIPATE MANAGEMENT CHALLENGES

Change is difficult for
some folks. When you
attempt to centralize functions and, in the process,
take authority away from
staff that "enjoys" that authority, the change can be
difficult. There will be challenges to this process...I
guarantee it. The only
question is how long does
it take for those challenges
to occur and where does it
come from? Be prepared
for these objections, listen,
and adjust as necessary,
but move fully toward implementing your vision.
1. Leadership
and Alignment

CEOs that begin this
process, and then promptly delegate the implementation of the spend
management function to
an executive who isn't a
'believer' or doesn't share
the same vision will be
extremely frustrated with
the result. A strong leader
that is aligned completely
with the vision must be
charged with leading this
effort and utilize change
management techniques
to develop buy-in to a
changing process.
2. Timely Decisions

Leaders and category
owners must be willing to

Continued on pg. 8

D I G I TA L D E A L E R . C O M

J U LY 2 0 1 9

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Digital Dealer - July 2019

Table of Contents for the Digital Edition of Digital Dealer - July 2019
