At mid year of 2014 corporate spend has been strong and going into the second half of the year government fiscal year spending and general big capital and project spend drive continued spend. 3 of 4 of Purchasing departments are at or above savings goals. The laggards face challenges from lack of people and tech resources and tend to be in industries with a high percentage of Indirect Spend Categories. Specific suggestions provided t

1. CPO Forum Discussion
August 2014
Ritz Carlton Halfmoon Bay CA
Bill Kohnen

2. Overview
• Purchasing spend is strong in 2014
• 75% of Purchasing organizations on track at mid
year to meet or exceed goals
• The 25% not meeting goals face resource issues
and challenges because of high level of Indirect
type spend
• Suggested Mid Year Action Suggested for all

3. Purchasing Send Trends 2014 Mid Year
• Because of increased spending but modest
inflation most purchasing organizations are
ahead on their absolute annual cost savings
goals.
• Governments and companies aligned with
government style budgeting will see a
spending surge prior to end of their fiscal
years

4. Purchasing Spend for Balance of 2014
• September and October also look relatively
strong for private and non governmental
spend.
• Normal seasonal slow down in Nov and Dec.
• A notable exception being Capex and large
project spend looks stable through year end.

5. Mid Year Purchasing Savings to Goal
(Absolute Numbers)
Above Goal At Goal Under Goal
45%
25%
30%
75 % meeting or ahead of goals

6. Those Not at or Above Goal
• Laggards on spend savings tend to be where there is a
higher than average spend on typical indirect categories
such as finance and service sectors.
• Those not meeting goals cited challenges:
– Unpredictability of growth,
– Increasing difficulty in attracting top purchasing talent
– Lack of process tools to create spend visibility and drive
efficiency.
• Suppliers to this space such as IT, consulting and services
sense the weakness and continue to charge premium
prices.

7. Suggested Actions
Status
Ahead of Plan Ride it out as it should continue to be a good year.
Reinvest Savings in Training for Staff
Invest time in Strategic Sourcing plans for long term projects
If you have visibility to demand for 2015 might want to start
discussion early about pricing
On Target Review your expected spend for balance of year to determine
opportunities.
Some attention now should keep you on track at a minimum
Evaluate potential projects with quick payback with focus.
Evaluate current tools and process for gaps
Under Plan Keep trying and evaluate spend profile for rest of year
Immediately start internal discussion about what needs to
change and make that the focus of the rest of the year. Hiring
the right people, training current people, evaluating new
sources, obtaining new tools.

8. Summary
• Overall spending 2014 is strong and most
departments are on track to meet savings
totals
• The 25% that are under plan are impacted by
constraints in their organizations and also high
level of Indirect Spend
• Attached as a take away are some typical
action items to try to catch up on savings

9. Steps to Jumpstart Savings Now
• Contracts and Purchase Orders
• Suppliers
• Very Aggressive Approaches
• Forward Looking Steps

10. Contract and Purchase Order Opportunities
Action Savings Potential
Negotiate blanket orders for balance of
years non contract consumable
requirement
5%
Pull ahead negotiations for contracts
set to expire in Q4 and negotiate
immediate savings for 18 month
renewal
5% to 7%
Auction balance of years requirements
for multi sourced items
10%
Constrain and consolidate orders and
time release at end of suppliers fiscal
month or quarter and ask for additional
discount
5%

11. Supplier Based Actions
Action Savings Potential
Auction balance of years
requirements for multi sourced
items
10%
Look to alternate suppliers for
items sold via distribution. 5%
Consider working with
independent broker.
5%
Locate end users with excess
inventory 20%

12. Very Aggressive Steps to Take
USE WITH CAUTION
Action Savings Potential
Where there is no contract in place simply send out orders at a
price lower than quoted or on the requisition. See if the supplier
will accept once they have order in hand 10%
For single source supplier approach them and say planning has
started about where to devote resources to develop additional
sources to reduce cost, mitigate risk and improve performance.
If they reduce price proactively they will stay off list or at the
bottom.
5%
Review savings metrics calculations and assumption. If on the
conservative end of continuum move towards more aggressive
savings calculation as long as still reasonable
3%
If supplier supporting multiple divisions have them subsidize
savings at one division based on business elsewhere 8%
Decrease pay terms for additional discount 2%
Use PO and direct pay rather than PCard 2%

13. Forward Look Approaches
Action Savings Potential
Put in place cloud based indirect
purchasing tool/marketplace
(some are very low cost with fast
startup or get it on a trial basis)
10%
Require immediate cost savings for
consideration for new opportunities
5%
Look outside of normal categories
for potential low hanging fruit in
unmanaged spend categories
10%
Move forward on qualification of
alternate suppliers and start taking
“risk materials” for a portion of
total requirements
5%