Supplier strategy

5 reasons why using an expert to manage your indirect spend will pay for itself

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Are indirect expenses directly costing you cash flow you don’t need to spend? While you may have a difficult time defining your indirect spend, these expenses seem to have no such problem adding up.  Expenses such as marketing, office equipment, maintenance or industrial supplies are just a few typical indirect expenses.  Organizations rarely have the right resources available to manage these costs, but that does not mean they can’t effectively manage the expenses.

Here are 5 reasons why companies should look to experts to help them manage indirect costs:

1. Ability to tap into expert knowledge

No matter what business you are in, everyone has a core business they perform and unless you specialize in indirect cost management, your organization is likely to be leaving money on the table. Most organizations do not have the expertise in house to match those skillsets on the other side of the table when it comes to buying indirect goods and services.  This is why using experts makes sense.  We all use experts throughout our lives.  Would anyone really consider doing their own dentistry? How about legal advice, tax advice or just car maintenance? We all use experts in our life to get the best value and provide a level of protection.  Indirect spending is no different.

2. Lack of internal resources

Everyone is faced with doing more with less. Procurement is no different.  This is why every procurement department is focused on their core suppliers that keep the daily operations functioning at a high level.  But who is actively managing non-core suppliers? In most organizations, no one!  Indirect providers know this and use this to their advantage. This is exactly why companies are paying too much and not getting the highest value for their money.

3. Turn-key solutions

Just like you would never expect your doctor to ask you to run a blood test, experts do not ask you to handle the research, analysis and communications needed to provide a solution.  Sure some interaction is needed to gather and understand the issues, but the actual work is performed by industry experts that are very experienced and trained to provide cost effective solutions ready to implement into your organization.

4. Increasing cash flow

Indirect spend can range between 20-50% of all expenses.   Finding a way reduce indirect spend therefore has a very positive effect on increasing the bottom line.  Many indirect cost reduction projects find ways to reduce costs by double digits.  What impact would reducing your spend by double digits mean to your organization?

5. No risk

Still not sure if using an expert is right for you?  Try one for free.  The right experts will provide a no cost assessment up front to determine if the fit is right.  No investment is required.  The expert will identify the opportunities and provide a roadmap on how to achieve the results.  Compensation is paid out of from the savings achieved.

Every organization has indirect expenses. The question is how effective can you manage those expenses. Effectively managing those costs can make a huge difference in your cash flow.  Using the right team to help you manage these costs can pay for itself in a very short amount of time. If your goal is to reduce indirect spend in your organization but lack the proper resources, contact me for a no cost assessment and I can put you in touch with our team of industry experts.

Question: What is your experience in managing these indirect costs? Please share your experiences with me.

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5 reasons why a supply chain a strategy is critical to successful companies

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How many organizations use a supply chain strategy to create competitive advantage?  In my experience, most small to medium size companies ignore the fact that a well-designed supply chain strategy can create many benefits including a competitive advantage.  The properly executed supply chain strategy has far reaching effects from the suppliers to the end customers and allows limited resources to focus on their core business function.   Direct cost reductions are just part of the benefits.  Indirect benefits can also include shorter lead times, lower cost of ownership and ultimately a competitive advantage.

Here are 5 reasons why it is important to create a supply chain strategy.

  1. Supply chain strategy sets the overall guiding foundational principles of the entire supply chain organization.  It helps define the directional strategies from people, partnerships, supplier base, capital investments, processes and goals.  Without such well-defined directional guidance your organization may find itself running down unknown, dark, dangerous paths and possibly out of control.
  2. A well-designed supply chain strategy helps to properly align the supply chain team in an efficient, creative and a collaborative environment from executives, buyers, logistics and the supplier network.  This alignment helps provide the framework to ensure all other supply chain initiatives fit together properly and are working for the same goals. If you don’t have this comprehensive alignment, then you cannot expect very much from your supply chain team when it needs to respond to unforeseen challenges and to quickly to come up with innovative solutions or new ideas.
  3. The strategic plan is based on the needs of the whole organization. The supply chain strategy must support the overall goals of the organizations and should extend all throughout the supply chain including the supplier network.   For example, if your company markets itself as a local provider of goods, sourcing from overseas is probably not a good fit.
  4. The proper supply chain strategy allows organizations to focus on their core business internally while at the same time allowing their suppliers to focus on their business.  This may seem simple, but too often companies lose sight of their core and begin to dictate to suppliers requirements that add no value and only increase costs.  Due to limited resources everyone must deal with, focusing on your strengths creates an amazing collaborative environment that can create win-win solutions.  This directly leads to cost reductions across the supply chain both internally and externally. Any organization that lacks a true strategy will likely find its’ limited resources chasing projects that do not fit into the greater strategy.
  5. Well executed supply chain strategies can be used to differentiate your company from the competition. Does your competition focus on low cost solutions?  Then maybe providing value added services such as vendor managed inventories may separate you from the competition.  Will a shorter delivery time differentiate you from the competition?  How about using environmentally friendly supply chain?  Or maybe a technology driven solution will help you stand out from the competition.   Most companies that do not have supply chain strategy fail to distinguish themselves in the industry.

If your company is ready to explore with an expert how creating a supply chain strategy can help provide competitive advantages in your industry, feel free to call or email me at your earliest convenience for a free, no-obligation supply chain assessment.