Money Saved – What Next?

It’s not rocket science – once the big reductions in cost have been achieved, savings benefits diminish as major spend categories become properly sourced.   

It stands to reason that if the return from cost-saving initiatives diminish, so should investment in the activity.   But investment in cost-saving activity should not finish altogether – cost control doesn’t stop just when you’ve made the saving.

Spend on third-party goods and services account for a significant part of an organisation’s cost-base.  It’s in nobody’s interest to go backward, so there is a requirement for ongoing activity – managing & monitoring.  How do you lock in the savings?  

Continued Monitoring

This is best illustrated with two recent clients.  For both clients we achieved a 40% + saving in the same category.  However, once our contract expired: 

Client 1 opted to engage our services on an ongoing low-cost retainer for contract renewal and monitoring usage, supplier cost and performance.  

Client 2 was delighted with the savings that we were able to deliver them, but decided to manage their spend in the category themselves.  

Client 2 has recently switched supplier based on offers to entice new customers – at face value providing additional savings.   However, our ongoing analysis shows that there are issues with this particular supplier and it is highly likely that Client 2 will experience cost increases and deterioration in service in the short to medium term.

There is value in monitoring the market, supplier performance and internal compliance.  All contribute to ensuring that you get the best from a supplier.  Market conditions change and being proactive ensures that you continue to get the best for the business.

Identifying Value beyond Price Reduction

This is a theme I’ve touched on many times before, particularly in “Beyond the Transaction”.   A deeper understanding of the business, suppliers and end-customers can – with some suppliers – lead to not just better management of day-to-day transactions, but create long-term engagements for greater value.

Working closer with a supplier can identify improvements in process.  Suppliers are often full of innovative ways of getting more out of their product or service but are concerned not to ‘over-sell’.  

Cost Saving doesn’t stop with delivery of the initial savings.  It’s an ongoing process.

A Cost Saving initiative can generate significant reductions in spend.  But there’s always more and it’s vital that gains are not reversed.    Continued – albeit reduced – investment in cost control and supplier engagement can create long-term value and lock in the savings.