The Expense Category Manager Is Convinced That There Is No Cost Reduction Potential Within The Spend Categories They Manage

Even if the expense category manager has consistently implemented thorough industry reviews at the end of current agreements or at least every three years, you still have significant lost profit recovery potential.

No one is an expert in all areas.

Chances are good that the expense category manager hasn’t ever worked within any of the vendor industries they are buying from. As a result, the many secrets that each industry guards closely are costing your company hard profit dollars.

When we’ve encountered an expense category manager that’s firmly entrenched in the belief that there’s no possibility of any lost profit recovery potential within the expense categories they manage, we know that the opposite is true.

Their “domain protection” is usually a disguise for their fear that there is cost reduction potential. They resist any suggestion that they conduct a thorough expense category analysis. Managers like this consistently resist assistance or insight from outside resources.

As a result, they rely on their personal experience, peers, or possibly purchasing organizations they belong to. The challenge is that buying from an industry is very different than intimately knowing the industry’s inner workings and cost of goods. In other words, the topics described in sections five through nine.

Using a healthcare industry analogy, the family practitioner knows a little about a wide variety of topics regarding the human body. When they need more information in an area, they readily reach out to a specialist. The specialist knows a lot about one topic regarding the human body. Working together, they produce a superior result for the patient.

In business, expense category managers oversee many (often hundreds) of expense categories. For some reason, there’s a perception in business that the expense category manager is supposed to know a lot about a wide variety of expense categories which the healthcare industry has already realized is unpractical.

This perception is costing companies like yours tens to hundreds of thousands (and often even more) of lost profit dollars.

Next week…Reason # 14