When was the last time you analyzed your vendor spend and took pro-active measures to control them?

Before you can reduce vendor cost, you need to understand what the controllable cost is. For this begin with understanding who is spending, on what items, and with whom. As you start this analysis, you may find that you need to revisit how data is being coded into the systems.

On one cost reduction project that I worked on, 90% of the spending for a large operational area was being coded against miscellaneous items. This meant that any meaningful assessment of historic spend would require sifting through the comments (thankfully AI can help tremendously with this now). We used a combination of historic spend comments and workshop with requestors as well as buyers to determine how the data entry processes needed to be updated. This helped provide more transparency into actual spend.

Once we had clean data, it was easier to dig deeper to understand what was being ordered. As we dug deeper, we were able to show the business team that there was a need to consolidate spend. The same items were being ordered through multiple suppliers. We also saw that the spend was spread across too many vendors. Both of these factors heavily impact the customer’s purchasing power. Consolidation of vendors was the natural follow-up action, and that saved the customer several hundred million dollars.

Please contact us if you would like to reduce the vendor spend reduction in your organization.