Most companies responded to the global financial crisis in a formulaic manner: Cut costs quickly, hunker down, and wait for growth to return. However, after years of austerity, companies still find themselves facing higher profit expectations and in turn pressure Procurement to continually deliver more savings.
Continued Cost Pressures
Cost-Cutting Campaigns Are Not Enough
Unfortunately, cost-cutting campaigns do not have a high success rate and are frequently unable to generate sustainable cost savings. Only 30% of companies achieve their cost-cutting goals during the first year of such a campaign, and a mere 10% are able to sustain their cost savings for more than three years.
The best companies overcome this challenge by retaining talented sourcing professionals and building process discipline around category strategy development. This solution remedies that fact that inconsistent performance and overlooked opportunities across the spend portfolio cost the average organization about $50 million per year in missed savings.
What the Best Companies Do
Design & Develop Category Strategies
The best companies create multi-year, strategic plans that generate sustained value in critical spend categories.
Sell Category Strategies Internally
The best companies create clear, concise pitch decks to sell their strategies internally and measure value using metrics aligned to stakeholder priorities.
Evaluate Category Strategies
The best procurement leaders design a structured, objective process for reviewing category strategies and correcting underperformance, and push category managers to develop breakthrough ideas.