Capital efficiency is a core focus for procurement teams, especially as the uncertainty around COVID-19 drags on. To support procurement teams in leveling up their spend management, we put together this guide with 5 best practices for increasing cost savings:
Regularly review your spend analytics to identify aberrant expenditures. Rogue spending can account for 80% of purchases made in organizations, so it is crucial to notice and remove such spending and establish a process and system that maintains the integrity of spending across teams and departments.
You may be just at the purchase threshold for tapping into discounts or you may be paying for features that you are not fully utilizing. Make sure you are aware of the discount terms and offerings of your suppliers at the outset and as they evolve. Have an open dialogue with your sales or support representatives from your supplier teams to ensure you constantly have the most up to date information and are making the best use of your contract.
In striving for capital efficiency, less is often more. Managing dozens or even hundreds of suppliers is time and cost consuming. Moreover, working with documentation for each of these can lead to error and internal confusion. Consolidate your suppliers through ordering from a marketplace, especially one that leverages technology to manage all the documentation and other reporting for you in a seamless, connected workflow. By outsourcing your manual procurement tasks to a marketplace, you can reduce overhead expenses, relieve your scientific team of clerical tasks, and gain an edge over the competition by bringing products to market more quickly.
By understanding exactly how much of each product or even a general class of products your team is using, you can better determine which supplies to purchase more of (and tap into the aforementioned volume based discounts) and which supplies to purchase less of or even phase out altogether. Too often, procurement teams continue to purchase in the same quantities arbitrarily set by the initial order places. Through reviewing your evolving needs as a team, you can more optimally allocate your capital and identify cost savings.
While team members know that cost saving is important, if the focus is not explicitly articulated, they may be hesitant to pay special attention to capital efficiency when making their purchasing decisions. By forming and implementing a training centered around cost savings, you will integrate this focus in your company’s culture and your team member’s decision making processes.
To find more ways to optimize your research lab and product operational budget, take our free lab efficiency assessment today.