What potentials are there in purchasing?

Potentials in purchasing can refer to many different contexts. Reference is to cost savings, for example, when speaking about savings. These could be potential reduction of purchase prices from which cost savings could result, or cost savings that are deduced from process improvement potentials (e.g. automation through e-Procurement systems). Clustering potentials or potentials through standardization or specification changes as well are included just like possible changes in suppliers or the transfer of spend to more cost-effective countries or regions.

The term potential, however, suggests that the savings and efficiency potentials are only possible cost savings, and not savings that have already been realized.

A systematization of potentials in purchasing is most likely successful when one bears in mind the typification of purchase successes and cost savings in purchasing. Some of the potentials affect direct cost reductions, other cost avoidances or improved liquidity in purchasing.

A further classification of potentials can be used when the market-standard logics are examined for value levers. For example, the A.T. Kearney management consultants with their purchasing dashboard, offers a system of 64 (some of which are redundant) levels with which the efficiency and effectiveness in purchasing can be increased. Behind every lever there are hidden potentials (that A.T. Kearney only names in part) that need to be brought to light.

A different approach to recognizing potentials for cost savings semi-automatically is offered by Orpheus with their SavingsFinder concept. Here, data-driven Big Data analyses attempt to recognize anomalies, deviations and inefficiencies in the purchasing data. From these, the system then calculates potentials or suggests recalculations, which are analyzed in more detail by experienced purchasing experts. The objective is to transfer approx. 10%-20% of the potentials into real cost savings in terms of cost reductions or liquidity savings (see Orpheus SavingsFinder).

In general, there is a trend to replace expensive management and purchasing consultants with software, at least for the simple, data-based potentials analyses. This trend also operates as “automation of consultation.” The software-supported se of modern KI methods has the advantage that the potentials analysis knowledge cast in software can be applied faster and cheaper than the consultant, and can be repeated any number of times.

SpendControl 2017
SpendControl is a complete Procurement Controlling and Spend Management solution. It provides all functions, KPIs and measures needed for professional Spend Analysis.

With its standardized ERP interfaces you can connect the spend cube of SpendControl within a short time frame to any ERP system (e.g. SAP, Navision, Oracle etc.).
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