Saving initiatives can be complex and difficult to follow up in large organizations. For example, a common mistake is to store the savings in more than one database which often include problems such as overlapping and/or not updated saving initiatives, which make it difficult to create a global view regarding all procurement saving initiatives. A Savings Control Tower is a solution which gives your organization a tool for business planning and transparency into all saving initiatives.
This article focus on two main themes:
- The critical dimensions for a successful saving delivery.
- Why we recommend a Savings Control Tower as a tool to enable the success.
Six steps for a successful Savings Delivery
There are 6 key steps in order to enable a successful savings delivery:
Set your goal definition and define the savings target. It is important to clearly link savings target to corporate goals and strategies and also to communicate the saving targets to enable commitment from the organization.
Be sure to have spend transparency since it is a critical enabler to reduce purchasing cost. Leverage a spend cube to get total transparency within all relevant dimensions, e.g.: Suppliers, Supply streams, Business Units etc. Inputs to the spend cube are typically: Chart of accounts, Category Structure, Expense reports, Supplier Master, Material Master etc.
Perform an opportunity assessment. Once the spend is transparent the savings goal can be verified Bottom Up by performing an opportunity assessment. During the assessment key saving levers and saving potentials should be defined per savings initiative. Saving initiatives should be prioritized based on Savings Opportunity and Ease Of Implementation. Implementation of initiatives should also be planned in waves according to prioritization and aligned with savings target. Last, saving initiatives needs to be validated cross-functionally from a Sourcing-, Product- and Process-perspective.
Establish governance model and tools, and start the savings delivery phase. Keeping the data centrally stored in a robust and flexible IT solution will result in a faster value setup. It is also important to refine and detail the saving initiatives to increase accuracy of savings delivery, and govern the savings delivery while providing full transparency including track savings, identify risks and bottlenecks, enforce mitigating actions etc.
Track the savings initiatives against clearly defined toll gates for degree of implementation (DOI). From idea to impact the savings initiatives run through five “degrees of implementation” (DOI). Controlling needs to be closely involved in the processes to create credibility for the saving measurements. Clearly defined processes are necessary to govern +1000 opportunities.
- Be certain to have strong executive sponsorship and facilitation of an agreed savings process that supports cross-functional decisions. It is critical that both sourcing and controlling are agreed on the calculated saving and that there is a good collaboration between several different functions so that the most suitable decisions for your organization are taken.
Why Savings Control Tower as a tool
A Savings Control Tower can be used as a tool for business planning by giving full control of when profit and loss effect is reached. A Savings Control Tower provides full transparency including track savings, identify risks and bottlenecks, enforce mitigating actions etc. It enables detailed transparency in all initiatives and enables reporting on the highest level of aggregation. The tool also makes it is possible to forecast of contracted savings and implemented production changes, as well as making forecast of profit and loss effective savings. With a Savings Control Tower there will be a global view regarding all procurement saving initiatives and it enables to consolidate saving reports and mitigates major saving risks.
Savings organization with Savings Control Tower
The above figure shows how a Savings Control Tower can be set up in an organization where the Savings Control Tower is used as a support function to the Savings manager. In this saving organization there are clear targets and responsibilities for each member to ensure high focus and control. A Savings Control Tower also enables alignment within different organizational units and provides support for savings program members. Implementing a Savings Control Tower is also cost efficient as a small team can govern global programs with several initiatives and involving numerous stakeholders. To conclude, the Savings Control Tower enables quick understanding of the current situation, generate key initiatives, establish control over saving initiatives and is highly cost efficient. All to make sure that you have the right tool for a successful savings delivery.