Viewing entries tagged
savings pipeline

Managing that other Funnel

The sales funnel. It’s familiar to all of us, even those who have never worked in sales. The principle is easy to understand. Sales opportunities start at the top of the funnel. Some of the these opportunities fall out as the funnel narrows, until the actual sales drop from the bottom of the funnel. The funnel can also be referred to as a pipeline, but the principle is the same. It’s impossible to imagine a sales function not actively managing their sales pipeline in some way.

Yet what about procurement? There are direct comparisons with sales. The “opportunities” tracked and measured within a sales function are potential benefits to the organisation, usually in the form of increased revenue. These opportunities have a value and they have a likelihood of success that increases the further through the funnel they go. Each opportunity is managed by a person or a team of people, potentially going through a series of review points where approvals are made, and the benefits delivered to the business are forecasted and reported.

In procurement, our “opportunities” take lots of different forms from simple cost reduction, to demand reduction, to other forms of quantifiable value. These opportunities also have an increased likelihood of success as we progress through them. They are also managed by a person or team and go through a series of review points, and the benefits are forecasted and reported.

The parallel is striking, and yet how many procurement functions actively manage their pipeline? If it’s unthinkable for a sales department not to have full control and visibility of their pipeline, why should it be any different for a professional procurement department?

Just as sales teams are increasingly using cloud based solutions to manage their pipeline (62% of all CRM software will be cloud based by 2018), procurement teams should be doing the same. Managing your opportunity pipeline in such a system brings numerous benefits. It provides increased efficiency and visibility to cost reduction projects and also helps to embed a robust process, with the appropriate workflow and approval controls ensuring that opportunities are handled with a common approach, right from idea through to implementation. Ultimately it increases the credibility of the procurement function and the benefits being delivered.

Provalido’s Savings Tracker is designed to do just this. With decades of procurement experience going into the design our solution enables organisations to manage their cost reduction projects through their full lifecycle. It’s easy to use and also flexible so it’s fully compatible with your sourcing process, savings definitions etc.

We’d love to show you more, so for more information, or to arrange a demo, please contact us today.

6 Tips for Building Your 2016 Savings Pipeline

It’s getting to that time again when procurement folks, egged on by their finance colleagues, cast their eyes towards the next calendar year and start to put together a savings pipeline. For some organisations this in an ongoing iterative process, for others it’s typically an annual cycle. Whichever way you do it, here are 6 tips for building a savings pipeline.

1.     Tackle at least a third of your managed spend. It’s good practice to address most areas of spend at least every 3 years, so therefore at least a third should be looked at each year. In many cases, this should be more frequent, so treat a third as a minimum.

2.     Don’t be constrained. It’s easy to dismiss for example spend that’s under a long term contract, but although a long term contract may restrict what you can do, it doesn’t necessarily mean there’s no room for cost reduction. Savings can take many forms including demand management, efficiency improvement etc, so it’s not all about reducing prices. Equally don’t be constrained by what has or hasn’t been done before. Think creatively.

3.     Look for areas of spend where there have been changes. These could be commodities where supply & demand has fluctuated, or it could be supply markets where there has been recent consolidation or innovation. The change could also be internally driven like a dramatic increase in demand. Change often brings opportunities for cost reduction.

4.     Engage with stakeholders and other areas of the business. Ask them for ideas and discuss your thoughts with them. As well as generating more opportunities, communication and inclusion at the front end should help with buy-in further down the line.

5.     Be realistic. Treat the pipeline like a funnel. Just as a sales funnel narrows down, expect your savings funnel to do the same. Not every idea will come to fruition as a saving. Therefore, apply a probability to your ideas and make sure you have enough to ultimately reach your savings target. Also be realistic about timescales. Allow sufficient time for implementation and make sure projects are started in good time in order to maximize the return within the year.

6.     Track how accurate your forecast is. Your pipeline will produce a savings forecast. We all know that some people are prone to be too bullish about what can be achieved while others will naturally “sand-bag”, but in order to improve your forecasting capability for the future, keep a track of how your forecast evolves over time and how it compares to the realized numbers when they start rolling in. If you’re spot on, this will add credibility to your forecast next year, if you’re not, then find out why and figure out what you can change to become more accurate.

So have fun building your pipeline and creating a savings forecast, and if you'd like the convenience of doing this all in an on-line tool where you can also then manage your projects and report your realised savings then of course we'd be delighted to hear from you here at Provalido!