Procurement Savings – How to Lie, and a Webinar on Measuring Properly

Here are just a few ways in which you can lie about procurement savings.

  1. Simply do not include any categories or deals that go against you in your reported “savings” . If you made a wrong guess on the way the energy market was going, and locked in at the wrong price, just don’t include any reporting on that spend area.
  2. But claim the benefit for any market or currency movements that have gone your way. Oil prices halved? Huge savings, all accredited to the procurement function’s brilliant negotiations (never mind that you only got a 5% price reduction, when it should have been nearer 50%)!
  3. If the unit price went up but you bought less volume of an item, claim a “demand reduction” saving.
  4. If the unit price went down, but you bought twice as much, claim a “price reduction” saving on the entire volume.

And we could go on ...

Look, we know that most procurement functions are less than fully truthful about their savings. But the problem is, as CFOs and CEOs get more savvy about procurement, they are catching on to this. They may go along with it so they can tell their shareholders (lying again) about the amazing “savings”, but they probably don’t believe you in reality. And so the credibility of the CPO, the procurement function, and the individuals in it, all take a knock. Or at best, that credibility and reputation does not improve.

That’s why, since we first came across it four years ago, we have been fans of Sievo’s software, which gives the most convincing analysis we’ve seen in terms of really identifying savings and the drivers behind cost movements. And that’s why we are looking forward to a webinar which I’m chairing next week on April 16th, at 2pm UK time, 3pm CET (and 9am east coast US) titled “Indisputable Savings.” You can register here now, free of charge.

As well as my thoughts on the key issues, we will have a real-life case study from Grundfos, a global leader in advanced pump solutions and a trendsetter in water technology. Klavs Hornum and Stinne Ulriksen from the firm will talk about how they have implemented Sievo’s tools to execute savings projects and track realised savings. Finally, Johan-Peter Teppala, VP Operations at Sievo, will complete the line-up.

This is a key topic for every procurement function, so I do hope you will join us - and you can still download our SNCF case study here, explaining how that organisation achieved a similar procurement credibility boost.

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First Voice

  1. Anya@MarketDojo:

    A very interesting article.

    As easy as it is to lie in the heat of the moment, it is always short-lived. And also completely unnecessary when there are many ways o achieving genuine savings- i.e. eAuctions.

    To quote the well-known Russian proverb

    “With lies you may get ahead in the world — but you can never go back.”

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