What could your organization do with 18-22% annual recurring savings on your General & Administrative (G&A) expenses, with limited or no change in vendors, partners, or business relationships?
This cost reduction outcome has been achieved by dozens of companies that have adopted “strategic sourcing” to identify and deliver expense management opportunities. The objective of strategic sourcing is to inject working capital back into the organization by reinvesting the expense savings into growth initiatives or other business areas that provide a high return on investment.
There are four sequential phases of an effective strategic sourcing initiative:
- Spend Overview + Vendor Categorization
The first step is to partner with strategic sourcing experts to conduct a diagnostic assessment of the organization’s current G&A spending—a customized spend overview that can serve as a general scope for the initiative. The specialists obtain a detailed extract of the company’s accounts payable data, which they then categorize into specific areas of G&A spend. Examples of categories where strategic sourcing can deliver significant recurring cost savings include: business products and services (office products, shipping, document management, etc.); technology and telecommunications (IT hardware/software, voice, and mobile services, data center, etc.); market data (legal research, financial research, company data, etc.); professional services (contract labor, benefits, and insurance, outsourced services, etc.); real estate and facilities (utilities, security, building services, etc.); and travel (agency, airlines, lodging, etc.).
- Opportunity Analysis
Based on their sourcing and business organization’s expertise, the strategic sourcing specialists analyze the current spending patterns, vendor contracts, and invoices at a granular level, leveraging their relevant recent experience and benchmarks.
- Strategic Plan
The next phase is to create a strategic plan for executing the new sourcing initiative. The plan should include specific cost savings targets; individual G&A expense areas and vendors that will be isolated for cost reductions; a timeline for the project rollout; and a workflow for monitoring and validating cost savings post-implementation.
- Implementation + Measurement
The final phase is to execute the plan via strategic negotiations with selected vendors and implement cost savings. Following the implementation, seasoned sourcing experts actively monitor, validate, and measure the savings on an ongoing basis to help the organization instill better habits and ensure accuracy and compliance. They will also continuously assess the process and seek spend category improvements to provide ongoing value to the organization.
Case Study
An example of the value of this phased process is when Octane partner, HBR Consulting, helped a recruitment and career management company with a program to increase efficiencies and reduce costs. HBR developed a strategy to facilitate savings while aligning future vendor relationships and spending with the company’s evolving priorities. This effort resulted in $3.4M in savings realized in the first 12 months and $8.2M estimated over the first three years for an astounding 326% ROI.
HBR Consulting provides advisory solutions on strategic sourcing, cost reduction, and procurement to organizations of all sizes and across all industries. HBR manages more than $8 billion in annual G&A spend for clients, helping them to maximize savings and minimize risk throughout their supply chains. In addition, HBR’s SpendConnect technology platform allows procurement officers and other managers to monitor their G&A spend in real-time while tracking their cost savings.
HBR + Octane Enterprise Solutions (OES)
HBR is pleased to partner with Octane to offer a complimentary “diagnostic” to determine whether a strategic sourcing program could work for your organization. All that is needed is some basic accounts payable information (vendors will not be contacted) and roughly 30 days to identify potential scope and savings opportunities. Fees are contingent and paid from realized savings; there are no out-of-pocket expenses for your company, and minimal internal resource time is required.
To learn more about HBR Consulting’s strategic sourcing advisory services, please check out this 90-second video. For more information about the complimentary “diagnostic” offer for Octane partners, please contact Brandon Wright at bwright@hbrconsulting.com.
Octane Enterprise Solutions (OES) is a subsidiary of Octane committed to furthering the overall mission of creating 55,000+ jobs in Southern California by 2030. OES aligns small, mid-market and large companies with its best-in-class, vetted provider network for operational resources and capital formation consulting. As a preferred advisor with OES, HBR helps companies within the Octane ecosystem by supporting their cost reduction analysis and implementation.
OES is the center point to convene resources that help companies scale and build revenue faster and HBR is proud to partner with them to support this effort. Octane is appreciative of this partnership with HBR as together it brings greater value to the ecosystem.
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