5 Strategies to Reduce Costs in Procurement and Supplier Management


Author: Antonia Renner

Supplier management can be expensive. Did you know that companies could save up to $6 million annually in supplier spend by leveraging trusted supplier data quality? *

Cost efficiency, cost reduction, and spend analytics continue to be among the top business priorities in supply chain management (SCM) and procurement. According to Deloitte’s 2016 Global Chief Procurement Officer (CPO) Study, 74% of CPOs are citing cost reduction as a strong business priority for the upcoming 12 months.

In today’s complex supply chains, CPO’s and Chief Supply Chain Officers (CSCO) need to achieve cost reduction in many different ways.

One thing we know is that it’s all about data. Data powers supply chain visibility. Supply chain visibility is a prerequisite for successful cost reduction and increased Return-On-Investment (ROI). Clean, consistent and connected data is required to fuel supply chain, procurement, operational and analytical applications and to achieve a 360 view of products, raw materials, services and suppliers. Based in this view, the business can make informed decisions, align tasks and find new ways to significantly reduce costs.

Coca Cola Example
Example of an Oil & Gas Company

Let’s take this example of a global Oil & Gas company: Their CPO realized they were wasting $2 million per year!
Why? The downstream supply chain team, which was negotiating contracts and sourcing products from “The Coca-Cola Company” for thousands of gas stations was operating independently from the upstream procurement team that was negotiating contracts and sourcing products from “Coke” for hundreds of offices around the globe. Like many companies, they simply did not have a total understanding of their supplier relationships globally. Their teams were storing and managing supplier information in multiple siloed systems, making it impossible to get access one trusted view of their vendors, their relationships with other vendors, and the products or services they supply.

Here are 5 data strategies that can help reduce supplier spend, procurement and even logistics costs:

  1. Data can empower your negotiation capabilities – Get a 360°- view of your suppliers.
    As described in the example of the oil & gas company above, you need real-time access to a consolidated 360°- view of all vendors if you want to achieve cost reductions in procurement. In order to negotiate corporate prices and payment terms with suppliers, you’ll need a total understanding of all relationships and spend with your suppliers across your business. A master data-fueled application for supplier relationship management allows you to uncover hidden costs connecting all supplier master data in one app.
  2. Increase agility! Streamline your supplier life-cycle management.
    Reduce costs by eliminating the business overhead required to manage your suppliers’ lifecycles, analyze and assess their information and performance. Speed-up and simplify processes, like supplier onboarding, by automating your supplier relationship management (SRM) and workflows using a supplier lifecycle management application with a supplier self-service portal. This leaves your supplier management teams more time to strengthen important relationships with strategic suppliers and drive innovation.
  3. Automate product data exchange with trading partners.
    For manufacturers, distributors and retailers, master-data fueled product information management (PIM) is the foundation for successful omnichannel commerce providing accurate and complete product data across all channels. It results in higher margins & conversion rates in e-commerce as well as faster product launches. A Product 360 view significantly reduces manual efforts and costs as it streamlines the process of updating, managing and sharing product information with trading partners, for example via the Global Data Synchronization Network (GDSN).
  4. Cleanse your data! Data quality is key for saving costs.
    It doesn’t matter if it’s your supplier, products, raw materials or contact data. Data quality is key for an accurate 360°- view of all supply chain operations in order to make the right decisions, successfully manage relationships and avoid manual workload. Therefore, data quality rules should be part of any business application. Data quality, especiallycontact and address data verification, is also an aspect when it comes to optimizing your logistics: Do you know how much it’s costing you to deliver to the wrong shipping address? How about how much you are penalized for late payments because it was sent to the wrong address?
  5. Increase efficiency! Leverage big data analytics in your supply chain.
    Big data analytics can boost your supply chain performance in many different ways. Embedding big data analytics in operations leads a 2.6x improvement in supply chain efficiency of 10% or greater, according to the Accenture Global Operations Megatrends Study. Check out my blog Overcoming 5 Major Supply Chain Challenges with Big Data Analytics if you are interested in learning more.

Remember: Saving costs often means saving time! Time that you can utilize in order to strengthen relationships with your strategic suppliers, develop and drive innovative business ideas, or explore new products and markets.

Download White Paper: “5 Data-Driven Challenges You Must Overcome to Strategically Manage Your Supply Chain”

* Result of an Informatica Business Value Assessment conducted in 2015.

Antonia Renner is Senior Manager, Information Quality Solutions Marketing at Informatica. Read more here: www.informatica.com 


About Author

Procurement and Supply Australasia (PASA) is the leading provider of information and education to procurement and supply professionals throughout Australia and New Zealand. PASA supports the largest community of engaged procurement stakeholders in the region, through its renowned series of events, publications, awards, plus various community and network building activities. PASA is a trading name of BTTB Marketing, for many years recognised as the leading producer of conferences and events for the procurement profession in Australia and New Zealand. Whether producing under the BTTB, CIPSA Conferences or now PASA brands over the last ten years, our events have consistently led the market in terms of both educational and networking opportunities.

1 Comment

  1. Antonia, the main point in reducing the cost when using PIM systems is the existence of portals for distributors and suppliers. With the help of these suppliers can update the information about their products, and already edited information is available to distributors, which increases the level of sales.
    I have a good experience with this since I’ve been using TreoPIM. I am convinced that such additional functions really help: https://treopim.com/features

Leave A Reply