PurchTips - Edition # 155

 

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Cost Savings: From Potential To Actual

By Charles Dominick, SPSM, SPSM2, SPSM3

How Can You Achieve Your Cost Savings Potential?

Many times, the cost savings estimated at the beginning of a contract exceeds the amount that you actually save. This failure to achieve cost savings potential is called "leakage" and poses a threat to the credibility of purchasing professionals and departments. Leakage occurs when a purchasing department establishes an enterprise-wide contract, yet many users within the organization still buy from other suppliers.

Cost Savings Potential

Why does leakage occur? "I've come up with four key reasons," says Barbara Ardell, a Vice President of consulting firm Paladin Associates. "Communication, inconvenience, fear of the unknown, and lack of trust."

In my recent conversation with Ardell, she shared eight strategies for mitigating leakage, including these three:

Monitor Expenditures To Identify Any Leakage - According to Ardell, "spend visibility is really vital" to understand when and where leakage is occurring. The better your spend analysis capabilities, the quicker you'll be able to take corrective action when leakage happens.

Celebrate & Publicize Sourcing Successes - Trade publications welcome stories of companies that achieve successful results. Securing an interview with a trade publication and having your stakeholders participate, "gives credit to internal customers, builds ownership, and also creates accountability," Ardell states. "How are you going to back down on a savings commitment when the CEO has seen it in a news report?"

Involve Stakeholders In The RFP/RFQ/Tender Process - "One easy way to do that is to have them involved in scoring the supplier surveys," explains Ardell. "You can also invite participation in the analysis of the RFP or RFQ responses or invite them to participate in the live [reverse] auction. There's nothing that gets excitement going in the stakeholder community than actually participating in a live bidding event."

I strongly endorse stakeholder involvement. If you want to drive compliance with a new contract and achieve the true savings potential of the contract, your new supplier must not be perceived by your stakeholders as "Purchasing's supplier." It must be regarded as "our supplier" - one that the company collectively chose.

If the "Purchasing's supplier" perception exists - especially if you've ousted a popular incumbent - your stakeholders may exploit the reasons why choosing the supplier was a bad decision. In many companies, stakeholders have the power to either help you achieve your cost savings potential or prevent you from reaching it. So it's important to work in harmony with them.

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Spotlight On Professional Development Opportunities

SPSM Certification

Are you tired of not getting enough opportunities, respect, and money out of your purchasing career? Well, guess what? Nothing will change unless you take action towards becoming a world-class purchasing professional.

You see, today's employers refuse to reward employees for yesterday's skills.They demand that purchasing professionals like you use the most modern skills and achieve unprecedented results. They want you to save more money, achieve better operational performance, and reduce risk.

Is lacking a purchasing certification keeping you from getting the results, opportunities, respect, and money that you want out of your career? Today's employers refuse to reward employees for yesterday's skills. They want you to save more money, achieve better operational performance, and reduce risk. They demand that purchasing professionals like you achieve unprecedented results and without the most modern skills that can be a challenging feat!

So how can you acquire the most modern skills, achieve meaningful results, and convincingly prove your capabilities to today's employers? There is an impressive purchasing certification program that will teach you what you need to accomplish all of this and more. It is the SPSM® Certification, earned by completing the Senior Professional in Supply Management® Program. And you could earn it in less than a year - maybe even much less than a year!

Earning your SPSM® Certification by completing the Senior Professional in Supply Management® Program is the action to take if you want to bring the most modern purchasing practices into your organization and achieve your career potential. Learn how to earn your SPSM® Certification (and perhaps get an iPad) (with the option of getting a Study Guide on an iPad) at:

Distinguishing yourself as an achiever in purchasing is key to sustaining a rewarding career, even in these difficult economic times. Earning your SPSM® Certification by completing the Senior Professional in Supply Management® Program is to take if you want to bring the most modern purchasing practices into your organization and achieve your career potential. Learn how to earn your SPSM® Certification (and perhaps get an iPad) at:

Earning your SPSM® Certification by completing the Senior Professional in Supply Management® Program is the action to take if you want to bring the most modern purchasing practices  into your organization and achieve your career potential. And if you sign up for the Senior Professional in Supply Management® Program on or before May 31, 2008, SPSMSM Certification Program on or before 4/30/2007, you also get these and other bonuses valued at over $700:

  • FREE $30 gift certificate to Amazon.com!
  • FREE CD-ROM with printer-friendly versions of the class materials!
  • FREE Purchasing Performance Measurement spreadsheet template!
  • FREE audio CD about purchasing job security!

To learn how to earn your SPSM® Certification and get these valuable bonuses, visit:

Earning your Senior Professional in Supply Management® (SPSM) Certification is the action to takeif you want to bring the most modern purchasing practices into your organization and achieve your career potential. Learn how to earn your SPSMSM Certification at:

Learn how to earn your SPSM® Certification at:

www.NextLevelPurchasing.com/spsm.html

The Latest Purchasing News!

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Want to learn more about today's topic? Then check out my podcast interview with Bill Dorn! Podcasts are audio files that you can listen to on your PC, download to your iPod/MP3 player, or burn to CD. Our Purchasing & Supply Management Podcast SeriesSM is a new way for us to help you succeed!

It's absolutely FREE to download the audio. Add it to your collection of great purchasing learning material!

Download This And Other Podcasts For FREE At
www.NextLevelPurchasing.com/podcast.


Free Procurement Training & Certification Starter Kit

This Starter Kit gives procurement professionals like you a clear idea on what it will take to become certified. You'll get an excellent feel for what you will need to learn and how long it will take.

Click here to learn more

Included in your free Starter Kit:

  • Access to two lessons from courses that are part of the Senior Professional in Supply Management® Program
  • A Certification & Training Planning Template
  • Case studies
  • A free Basic Membership in the NLPA

Together, these materials will help you decide how well the SPSM® Certification can help you achieve your career goals.

So, what are you waiting for? Begin your pursuit of a more rewarding procurement career – get your Procurement Training & Certification Starter Kit now by signing up for a free NLPA Basic Membership!

If you are already a member of the NLPA, click here to login and visit the "Starter Kit" tab to access these resources.