Shortcut to Realizing Cost Savings Faster
Strategic sourcing project projects can take 12 to 18 months before you start realizing savings. Four to six months to segment the spend and interview, identify suppliers, and conduct a multi-round market test. Then another 8 to 12 months to validate suppliers and gain customer approvals.
But what if you need to deliver savings this year? Take a different approach – called Fast-Track Savings – that has proven to lead to $200K+ savings in as little as 14 weeks.
Three things are necessary in order to accomplish this accelerated timeline.
Select the Right Category
First, you must accept that categories that are not easy to resource are off-limits. If lengthy supplier validations or customer approvals are needed, that category is off the table. The good news is, it’s very likely your company has categories or sub-categories with $2M to $20M annual spend that are easy to resource. Here are a couple of examples:
A manufacturer with a $36M injection molding spend segmented their spend into four sub-categories to identify a $6M segment that would be easy to resource:
- $20M grained class A would require lengthy customer approvals
- $5M assemblies would require extensive testing
- $5M painted parts would be difficult to find alternative suppliers due to quality requirements
- $6M functional black plastic meets the criteria for easy-to-resource
A manufacturer was spending $4.4M annually on freight, 81% coming from Truckload and Ocean. They were unhappy with their 3PL’s performance but didn’t want to change the carriers for these two biggest sub-categories. With the help of a logistics expert, they quickly conducted an RFQ of 3PLs that could address the known service concerns while keeping their trusted Truckload and Ocean carriers. Within 14 weeks, they changed 3PLs and saved $220k annually, mostly from LTL.
Minimize Resistance to Change
The second necessary component for realizing cost savings quickly is to build mechanisms into the project to minimize resistance to change. Here are three roadblocks that must be overcome that you must address up-front if you want to implement savings quickly:
| Roadblock | Preventive Measure |
| Key stakeholder requirements aren’t stated in the RFQ, making for a poorly scoped solution from suppliers | Interview stakeholders (users and anyone affected) to identify pain points and unmet needs |
| Slow cross-functional support to get specific details needed for the market test | Recruit an executive sponsor and ask for help getting support from other functions |
| Can’t get cross-functional support needed to implement change once a new supplier is selected | Establish a savings target up-front so everyone understands why the change is needed |
Recruit a Category Expert
The third and final component is to recruit an experienced category expert for the project. You need someone who understands what suppliers need in an RFQ package to respond quickly and quote accurately, and even more importantly, knows which suppliers can be a fit for your particular needs and will quote competitively to win your business. Here are two roadblocks category experts can help you overcome quickly:
| Roadblock | Preventive Measure |
| The part file provided to suppliers for quoting lacks critical details; suppliers have to make too many assumptions and quotes aren’t valid | Solicit input from an experienced category expert to identify what suppliers need to quote accurately |
| Can’t identify enough suppliers with the specific capabilities you need | Solicit input from an experienced category expert to identify potential suppliers |
Follow these three components, and you’ll find that savings can be implemented faster than you’d imagine.
Discover how manufacturing companies implemented $200K+ savings in as little as 14 weeks on MRO, resins, corrugated packaging, and domestic freight.
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