How Do You Show Value? - III

The importance of P and L relevance cannot be overstated. If you report procurement results that can’t be found on the Income Statement, your credibility will suffer greatly. In fact, as a CPO, I literally banned the word “savings” from our practice. Either a result was cost reduction, or it was cost avoidance. But never was it labeled by the vague term “savings.” 

To have the best chance of credibility with your internal clients, you need to build a framework and tracking system that is P and L relevant–and that means tracking and reporting only cost reduction from operating costs. See the figure below. 

(Note: this figure is © Copyright Greybeard Advisors LLC) 

This framework is one of the foundations for a credible approach to reporting the results from the efforts of your teams. You can build it yourself, or you can consider an off-the-shelf tool such as: 

http://www.electro-world.net/AppsWeb/CRTS/CRTSWeb.nsf

More in my next posting.