The Expense Category Manager Doesn’t Commit To An “At Least” Or “Worst Case” Hard Dollar Cost Reduction Figure Before Investing Labor Resources Analyzing An Expense Category’s Costs

Nearly any indirect spend category can be improved to some degree with attention and effort.

The questions is, do you want to get the very best value (including pricing, product/service quality, and vendor support) that vendors have to offer or are you satisfied with just getting a slightly better price?

Typically, the expense category manager wants to lower costs and/or improve product/service quality and vendor support, but doesn’t know what to expect.

I’ve heard 10% used as a common target, which is really just a guess.

It’s understandable because the expense category manager hasn’t reviewed this expense category within the last three to six months. To know what’s possible on the front end, one must be connected with the industry supporting that expense category on almost a daily basis.

And that just isn’t possible when you’re managing numerous indirect spend categories.

The key benefit to working with an industry daily is that you can keep your finger on the pulse of that industry and be aware of the most recent pricing, product/service, and vendor support changes. Only then can you know your target before you start.

Without knowing your ultimate target (or what’s possible), you’ll never know if what you’ve achieved in your analysis is the best value offered by the vendors in that industry.

All the expense category manager can do is choose the best vendor offering without knowing what’s really possible.  That gap is where Profit Siphons drain away your profit.

Next week…In Conclusion