Fighting For Relevance by Redefining Savings

In Gerry Preece’s Buying Less for Less, the author discusses the dilemma of measuring success for procurement organizations. Preece focuses specifically on the growing marketing category, and the challenge this complex and fast moving segments has proven to be for procurement teams.

Utilizing a simple savings calculation to understand the value driven by procurement activities in the marketing space completely misrepresents the actually impact. While there is certainly value in sourcing for savings, sourcing professionals disadvantage themselves and the organizations they work with by maintaining such a narrow focus. In redefining savings, procurement and marketing can more easily align on the organizational objectives as well as the metrics used to evaluate success.

Take an important metric for marketing organizations- top line revenue growth. Marketers have a plethora of tools at their disposal to track any number of items, but a typical goal for the overall organization is to expand the business and grow the top line. An apparent correlation may not exist between strategic sourcing and the growth of the organization, but by recognizing the importance of looking past savings and measuring something slightly intangible, procurement quickly aligns more closely with the goals of the marketers.

Another area where procurement can focus their attention is in seemingly non-impactable spend. More often than not, your partner will assist you in identifying additional cost savings opportunities, whether making minor changes to the brand approach, or major adjustments to decrease cost and maintain value, opportunities exist outside of the typical to drive down costs. Be wary of the strategic nature suppliers and the historic relationship are critical to initial buy in. Prior negotiated rate cards along with proven success are useful for benchmarking exercises that will assist in competitive evaluation and internal support.

The real difficulty is selling the concept of an expanded savings definition to a mature procurement organization. While I prefer a marketer first approach to sourcing, I recognize within some organizations, savings remains king and any additional value adds are just that – value adds. Too often a focus on savings leads to disaster, whether through the implementation of a less-than-stellar partner, or the reduction of a budget. Marketing exists to grow the business, and in hindering that practice, procurement quickly earns the ire or brands and agencies alike.

No singular definition of savings will fit every organization, but by expanding the organizational thinking and recognizing the competing priorities will assist in aligning stakeholders to achieve continuing success.