Part 2: How to Assess the Current State of the Category
As a result of the new economic reality, profit, and cash-flow improvements are a top priority across companies in every industry. The dynamics of the current climate shifts week to week and organizations are presented with the challenge of doing more with less. By assessing the current state of the category, or baseline assessment, organizations can identify, quantify, and prioritize initiatives to drive cost reduction opportunities. Opportunities that are usually missed because of fragmented spend across suppliers, under-resourced teams and reactionary management.
Though this approach is far from the cries of a new concept, oftentimes these assessments are conducted during budgeting and the financial planning season by most companies. Meanwhile, organizations are currently working feverishly to navigate the wake of the COVID-19 pandemic and may be taking a reactionary rather than a structured approach to decision making given the impacts. Taking a step back and using a methodical approach to identify where to target first and where the greatest savings opportunities lie.
By following the steps below organizations can identify the cost-reduction and improvement possibilities, and proactively determine how to achieve them.
1. Data Collection and Category Analysis
2. Opportunity Identification/Validation
3. Implementation Roadmap
Data Collection and Category Analysis
The initial phase is critical as it lays the framework for the entire assessment and ultimately a successful sourcing engagement. Missing data sets or contractual documents will not only delay the exercise but depict an incomplete picture for the assessment team to analyze. It's important to understand the qualitative details related to the category such as the incumbent supplier partnerships including the history, value-adds, and pain points of the relationship.
The fully developed spend profile creates a baseline to calculate savings projections for each opportunity. It's important to have buy-in from the stakeholder groups and ensure everyone, including finance, agrees on the savings methodology for each opportunity before proceeding to the final stage.
The implementation process for each opportunity should be planned out and will vary with available resources playing a key role. Today organizations are running lean as a result of the current COVID-19 climate and it may be unrealistic to expect teams to expedite identified programs. SourceOne's experienced consultants can support your organization's existing team in driving the identified initiatives, responding to the current economic challenges, and increase realized savings that impact the bottom line.
Be sure to look-out next week for part 3 of the Strategic Recovery in the Marketing Category mini-series where we will discuss why NOW is the time to be negotiating with suppliers.