At Procurement Leaders we have in the past months expanded our research focus to help our members adapt to a new challenging economic climate. The UK economy, for example, saw its worst contraction in 41 years in Q1 this year, and forecasts for recovery aren’t overly positive. This has forced companies to carefully protect their cash reserves and has put procurement once again in the centre of savings efforts. The levers we cover as part of our Delivering in a downturn stream help teams do this successfully.
Demand levers, as in demand management, specifications management and cost modelling, are important activities for procurement because many of the excess costs can be cut by influencing what goes on inside the organisation. Below you’ll find a summary of the research we have carried out so far on these three topics, with actionable insights to get this right.
Demand management is all about controlling costs by reducing the use of products and services, but also about finding ways to change spend patterns throughout the organisation. More impactful demand management strategies can be introduced through changes in governance, service levels and budgeting:
Much like in demand management, specs management is about influencing how stakeholders approach their purchases. Instead of just limiting quantities, here procurement should standardise and consolidate product and services features. There are a few ways to do this:
Cost modelling is about procurement needing to understand the cost breakdown of products and services so that it can impact these to deliver savings. In our upcoming research we will be looking at methods like supplier analysis, should-cost modelling, process mapping and value engineering. PL members can sign up to a Virtual Roundtable on the topic, which will take place on 5 August. More content on specification management will be available on our website later in August.