Informal 2013 Mid Year data shows many Purchasing Departments coming up short on planned cost savings goals. The good news is there seem to be a good chance to recover in the second half of he year. A variety practical approachs are provided to increase saving for the remainder of 2013.

1. CATCH UP ON 2013
COST SAVINGS
GOALS
Practical Suggestions on how Purchasing departments can catch up on cost savings goals.
Bill Kohnen
**** WARNING NOT All SUGGESTIONS ARE FOR THE FAINT OF HEART ****
Bill Kohnen 7/2013 Mid Year Actions to Improve Cost Savings

2. 0
2
4
6
8
10
12
14
Q1 Q2 Q3 Q4
Cost
Savings
Goal
Actual
MID YEAR
REVIEWS OF
SPEND AND
GOALS HAVE
PURCHASING
DEPARTMENTS
COMING SHORT
ON COST
SAVINGS GOALS
Good news is second half looks
better for cost savings but still will
need to make up ground from
early in the year.
Bill Kohnen 7/2013 Mid Year Actions to Improve Cost Savings

3. • Contract and Purchase Order Opportunities
• Supplier Based
• Forward Looking
• Very Aggressive Techniques
AREAS TO APPROACH
Bill Kohnen 7/2013 Mid Year Actions to Improve Cost Savings

4. Action Savings Potential
Negotiate blanket orders for balance of years
non contract consumable requirement
5%
Pull ahead negotiations for contracts set to
expire in Q4 and negotiate immediate savings
for 18 month renewal
5% to 7%
Auction balance of years requirements for
multi sourced items
10%
Constrain and consolidate orders and time
release at end of suppliers fiscal month or
quarter and ask for additional discount
5%
CONTRACT AND PURCHASE ORDER OPPORTUNITIES
Bill Kohnen 7/2013 Mid Year Actions to Improve Cost Savings

5. Action Savings Potential
Auction balance of years requirements for
multi sourced items 10%
Look to alternate suppliers for items sold via
distribution. 5%
Consider working with independent broker.
5%
Locate end users with excess inventory 20%
SUPPLIER BASED ACTIONS
Bill Kohnen 7/2013 Mid Year Actions to Improve Cost Savings

6. Action Savings Potential
Where there is no contract in place simply send out orders
at a price lower than quoted or on the requisition. See if the
supplier will accept once they have order in hand 10%
For single source supplier approach them and say planning
has started about where to devote resources to develop
additional sources to reduce cost, mitigate risk and improve
performance. If they reduce price proactively they will stay
off list or at the bottom.
5%
Review savings metrics calculations and assumption. If on
the conservative end of continuum move towards more
aggressive savings calculation as long as still reasonable
3%
If supplier supporting multiple divisions have them subsidize
savings at one division based on business elsewhere 8%
Decrease pay terms for additional discount 2%
Use PO and direct pay rather than PCard 2%
VERY AGGRESSIVE STEPS TO TAKE
USE WITH CAUTION
Bill Kohnen 7/2013 Mid Year Actions to Improve Cost
Savings

7. Action Savings Potential
Put in place cloud based indirect
purchasing tool/marketplace
(some are free or very low cost with fast startup)
10%
Require immediate cost savings
for consideration for new
opportunities
5%
Look outside of normal categories for
potential low hanging fruit in unmanaged
spend categories
10%
Move forward on qualification of alternate
suppliers and start taking “risk materials”
for a portion of total requirements
5%
FORWARD LOOK APPROACHES
Bill Kohnen 7/2013 Mid Year Actions to Improve Cost
Savings