In H1/2020, Covid-19 decimated the supply chain of tens of thousands of companies across the globe.
As we see some sense of normality begin to return to a now ‘new norm’, and with the revenue streams of businesses significantly impacted due to the global lockdown, some Purchasing departments across the UK have kicked off management led initiatives instructing their Procurement teams to find value and save money.
In this blog we speak to the Procurement professional looking for opportunities to achieve the strategic objectives of this management initiatives.
Why are Procurement teams being asked to do this by their management?
As we discussed in our ….. blog, we learned just how connected and vulnerable Industries are through the supply chain.
In the Tourism sector alone, lockdown affected airlines which in turn impacted hotels and those grounded flights really hurt the oil industry. All connected.
So with revenues down, and credit lines being reduced by the banks due to a fear of getting their money back, here are:
7 Budget Saving Management Initiatives post Covid-19
1. Review contract renewal dates.
As a former Head of Sales, no greater opportunity to reduce cost and save money on existing services presents itself other than when contracts are up for renewals.
Whilst we do encourage fairness, in the famous words of Simon Sinek, play the ‘infinite game’. Your revenues for Suppliers often keeps SME business afloat and employees in jobs.
Also bear in mind that the cost of replacing an incumbent for a cheaper solutions/service may have detrimental effects on your business downstream.
Approach your provider 3-6 months prior to renewal and open renewal conversation at a reduced rate.
Expect Suppliers to respond with giving you more service for the same value as opposed to reducing cost for the same service.
If you are not comfortable with negotiations, bring an experienced professional with you. Someone with authority and a key decision maker. This will strengthen your position.
2. Review stock levels
Sounds quite logical but with 3-6 months of trade lost to Covid-19, and some trepidation as the markets return to normal, you may not need to place orders at the same volume of previous years.
Review historical order volumes for the same period in prior years then consider reducing order volumes by the percentage you feel the market/traffic will be down by.
3. Centralise
The amount of times I walked into an organisation and learned that one department had one system whilst another department had an entirely different system service for the exact same purpose (CRM system for example) boggled the mind. Speak with other teams/departments within your organisation and learn if you can amalgamate service providers.
This can range from Technology to Services. This one step alone has the potential save your organisation tens of thousands of pounds per year.
4. Ask your Suppliers for discounts
Sounds simple but depending on your relationship with your Supplier you may simply be able to ask for the favour.
In some instances, offers to reduce costs for 2020 may include a ratchet or price increase back up in 2021.
Remember to include your Legal team in such instances as any such negotiation may result in amendments to your contracts/schedules/T&C.
One thing that worked well for me in the past from a Sales perspective was to ask for early settlement of an invoice.
If you are in the position to, ask your incumbent if they can reduce costs if you were able to settle the annual invoice in full up front.
This works well as some Sales professionals receive their commission once your cheque hits the company coffers.
5. Offer Introductions/Case Studies to add value to negotiations.
A referral or recommendation is worth its weight in gold to Supplier organisations.
Offer to be a Case Study or to make direct introductions. This may strengthen your position in negotiations saving you 5%-10% on fees.
6. Look outside of preferred Suppliers.
Have a preferred supplier list? You might as well just throw your budget into the bin. Tear up your list. Bin it.
Incumbents can become lazy and show no motivation to reduce costs. They may lack innovations when their cheque is guaranteed and this will adversely affect your business. It can happen to anyone; look at Blockbusters.
Through the Kaleida platform, you can identify new potential providers before making Credibility Based Tender Awards.
We’re working to onboard specialists in their fields who may provide you with a superior, innovative product at a lower cost. Where they leverage ecosystems that allow for efficiencies of scale they may be able to pass on savings to their clients.
7. Check your inbox for Supplier promotions.
Recently, on behalf of Kaleida, I’ve received offers of 30% discounts for some services via email. You may be surprised what offers you find in your SPAM folder.
Conclusion
Through no fault of their own, Procurement teams are in a particularly tricky spot. 2020 Trade shows are postponed, and identifying new suppliers may be difficult.
We hope that through our B2B marketplace, we facilitate the birth of many new Supplier and Buyer relationships that lead to economic growth and financial stability for all.
Thank you for reading .
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