Summary In the contemporary business environment, digital procurement is becoming increasingly popular and sought after by businesses around the world. The relationships …
How cost reduction consulting helps achieve procurement excellence
To achieve the highest level of procurement proficiency, businesses must optimise in multiple aspects. Here is how cost reduction consulting contributes to this endeavour.
Procurement excellence refers to the achievement of the highest level of proficiency and effectiveness in the procurement process. This involves strategically sourcing goods and services at the best possible value while also maintaining a high level of quality, sustainability, and ethics.
One of the most important aspects of achieving procurement excellence is optimising costs. This is made apparent by the value businesses place on services like spend analysis, which is projected to reach a CAGR of 17.9% by 2027, signifying massive growth potential.
Cost control is a core aspect of achieving procurement excellence as it directly dictates the effect on the company’s bottom line. Optimised costs also support supply chain resilience, enhance competitiveness, and contribute to the overall financial health and success of an organisation.
As cost reduction and optimisation play such a vital role in success, businesses must take all possible measures to ensure that they are done in the most effective and efficient way. This is where cost reduction consulting comes into play.
There is no be-all-end-all solution to reducing costs as the internal and external conditions that dictate cost are different for each and every organisation. Cost reduction consultants have the ability to analyse the unique circumstances of the organisation they serve and provide productive solutions that drive results.
Here is how they can contribute to the procurement excellence goals of an organisation.
How cost reduction consulting contributes to procurement excellence
Cost reduction consultants play an important role in helping organisations identify and exploit cost-saving opportunities within the procurement function with the unique perspectives they bring to the table as an external entity.
Possibly the most useful contribution that cost reduction consultants provide is their wealth of expert knowledge and experience. A cost consultant who has industry experience is well-versed in the trends, best practices, and standards of that particular industry, which enables them to identify inefficiencies and potential opportunities that internal teams may have overlooked.
This expertise allows them to present tailored cost-reduction strategies that will enhance the efficiency of the procurement process.
As an external entity, cost reduction consultants can also bring a fresh perspective to the procurement process. Objectively analysing the procurement process without preconceived biases results in more robust cost reduction strategies.
Since they have no attachment to the current procurement procedures, they can present innovative solutions that challenge the existing assumptions and processes. This can offer breakthrough cost reduction opportunities that may have been previously unachievable.
Organisations that provide cost-reduction consulting services also possess a much broader understanding of the industry, having served clients across multiple markets and sectors. This exposure further informs their insights with industry-specific best practices and innovative cost-saving strategies that are tailored to the unique needs of their clients.
How cost reduction consultants help identify opportunities for cost-saving
The process of cost reduction involves an extensive amount of research, analysis, and decision-making to comprehensively identify inefficiencies and opportunities for improvement.
Here is how cost reduction consultants can help in this process.
Data analysis
Collecting and analysing the vast swathe of information to identify patterns and anomalies that can offer cost reduction opportunities.
Spend analysis
Categorising procurement expenditure to identify high-cost processes, supplier dependencies, and opportunities for consolidation.
Benchmarking
Assessing the organisation’s procurement performance against industry standards to highlight areas for better cost control and efficiency.
Supplier evaluation
Evaluating supplier contracts, delivery timelines, and quality to ensure the best value for money is achieved through cost reduction.
Risk assessment
Developing mitigation strategies for potential procurement risks like supply chain disruptions, geopolitical risks, and compliance issues.
Technology utilisation
Ensuring the highest levels of efficiency are achieved in procurement through the technology of automation of these processes.
Stakeholder engagement
Engaging key stakeholders like procurement teams, executives, and suppliers to inform more robust strategies for cost reduction.
Achieve procurement excellence through bespoke cost reduction solutions from Kronos Group
Kronos Group’s procurement consulting services have been recognised across Europe and the world for the value it provides in the endeavour to achieve procurement excellence. Our comprehensive procurement consulting services include:
- Procurement maturity assessment
- Procurement excellence
- Procurement training
- Procurement outsourcing
- Spend optimisation
Our seven-step pragmatic approach to spend optimisation offers customised solutions for cost reduction that will help you achieve your procurement excellence goals.
Get started on your journey towards a more sustainable, profitable, and growth-oriented procurement function with Kronos Group.
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FAQ
There is no one-size-fits-all solution to cost reduction. Generally, it may include a combination of strategies like process optimisation, strategic sourcing, and digitalisation. Cost reduction consultants can help you pinpoint the most effective form of cost reduction for your particular situation.
The 5 main cost-reduction strategies employed by today’s businesses are:
- Target Costing (TC): Setting cost targets for products before production
- Activity-Based Costing (ABC): Cost allocation based on activities
- Just in Time (JIT): Producing goods as needed
- Enterprise Resource Planning (ERP): Integrating processes for efficiency
- Value Engineering (VE): Systematic analysis to maximise functionality and minimise cost
Cost reduction needs to take a strategic approach. This involves conducting a cost analysis to identify areas for improvement. Then, the company needs to implement a variety of strategies to reduce costs such as process optimisation, waste reduction, supplier relationship management, technology implementation, and collaboration.
