Pro-Active Budgeting for Success

It's that time of year again. Budget season. The time when fantasies about achieving new and spectacular results are dashed against the cold reality of the budgeting process in most companies.How to get around that harsh reality?

One way is to pick a few specific initiatives, obtain benchmarks of what is possible (from subject matter experts who have done this many times), estimate the support resources needed to get the job done, and include this bottoms-up approach in your budget request.What might those benchmarks looks like? Based on some recent successes that our clients have had employing Strategic Sourcing & Negotiations Management (SSNM), http://strategicsourcingtraining.com , strategic sourcing teams achieved the following types of cost reductions:

• MRO, Safety and Mill Supplies (15 to 35% cost reduction)
• Copiers, Faxes and Multi-functional Devices (20 to 30% cost reduction)
• Water Treatment Chemicals (30+ % cost reduction)
• Wireless and Mobility Services (20 to 35% cost reduction)

This is just a partial list of successes generated. We have benchmarks in our experience database for virtually all spend categories. (Note: cost avoidances are not counted in these results).

Another, more strategic approach, is to arrange for a current state assessment, combined with an opportunity assessment and business case for a comprehensive transformation of your procurement and supply chain activities. The compelling reason to pursue this approach is that you typically are able to position this, upfront, as a multi-year commitment to a multi-year program that includes virtually everything you need to become world-class.

When supported by experienced advisors, the deliverable is a significant Return on Investment (ROI) while enhancing capabilities of the organization to deliver future results on its own.

When I am asked about a particularly challenging situation faced by a procurement department, two of my early questions are: have you candidly compared your current state to best practices, and have you done an opportunity assessment and the associated business case?

When you HAVE done those fundamentals, you are likely to see senior management understand – and get excited about – what you can deliver for the future of your organization.

In conclusion, don’t let the conventional budget process constrain your ability to add real value to your organization. Follow one of the two paths outlined above to focus the attention on the big $ opportunity, not the headcount.

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