A penny Saved is a Penny Earned! March 21, 2019, 4:23 p.m.

penny saved

The strategic work of procurement impacts the bottom line directly. For instance, if net profit on sales is 5%, a reduction in supply chain costs from 12% to 7% will double net profits.

Strategy should take into account a solution that shall help manage all supplier related activities, information and data. It is unfortunate many supplier related activities are taken for granted and they lead to costs.

Soft costs result from the following activities that can be made more efficient and less time-consuming:

  • Looking for missing supplier documents
  • Calling suppliers due to missing email addresses/phone numbers
  • Looking up bank account information
  • Researching supplier contracts
  • Validating supplier tax identifiers
  • Managing and aggregating supplier relationships (parent/child)
  • Collecting and managing alerts related to a supplier
  • Mitigating reputational damage due to a supplier incident/event

Hard’ costs result from insufficient or low-quality supplier data. Such activities include:

  • Missed early payment discounts or rebates
  • Liabilities due to lack of knowledge from a lost contract
  • Cost of paper and materials being used for facilitating supplier activities
  • Cost related to off-contract spend
  • Cost of help desk resources required for managing supplier requests/complaints
  • Fines/penalties or missed revenue due to supplier non-compliance
  • Inability to act due to a supply chain disruption due to missing information
  • Training on supplier systems due to high turnover in procurement/AP
  • And even ‘managing’ suppliers that are no longer suppliers