As you survey your organization in 2017 you are likely focused on how you can make some permanent and lasting improvements in your organization. Since my expertise is in spend management, the focus will be on building out some organizational changes that will in fact provide sustainable improvements to your business not only on the hard dollar cost savings perspective, but also on the back office, management side where we have the opportunity to simplify the complex, to drive operational improvements that will yield to “soft cost savings” and create a multitude of new internal efficiencies.
Before we start…let’s go through a brief diagnostic that I have found to be extremely helpful in diagnosing issues or opportunities within Dealer groups. This abbreviated Best Practices diagnostic is designed to assess the way your business is organized in order to manage the commitment of your limited financial resources.
Best Practice Diagnostic
Before we get the spend management function of the business simplified and working better, we first have to assess the landscape and understand what we have to work with.
The diagnostic below is an abbreviated version of one we use for all businesses, dealerships included, because all functions identified below are critical to the smooth and controlled operation of the business.
Take a few minutes to think about your business and agree or disagree with the statements below.
The Best Practices listed above are simply good, effective and proven business practices that will help your organization run more efficiently and effectively if they are in place and utilized.
The Impact of Doing Nothing
Think about these Best Practices another way. If your purchasing functions are not limited to a few staff, if you do not have a sourcing plan, if you do not have a proven sourcing process, if you do not have contracts identified and managed, if you do not have baseline purchasing and approval policies and your preferred suppliers identified for your employees, do you really think your organization is running efficiently and effectively? Do you think the entire spend management function has become complicated or very complex to your employees? While your suppliers probably appreciate the lack of controls and structure because they have an easier opportunity to gain parts of your business, your employees really don’t know who is on first.
Many General Managers, Parts and Service Managers have grown up in the dealership space where there have been few expectations and controls on the management of the spend. Many of those folks think spend management is all about “negotiating the best deal” with the supplier, and they feel they are good at supplier negotiation, and as a result, they can be very resistant to any change in the structure and controls that Best Practices will provide. This situation is typically where poor controls, too many suppliers in the same expense categories, poor pricing, inconsistent pricing, and other problems occur leaving the owners or Dealers feeling that this area is just too complex to address…and that is where the big problem occurs.
Benefits of Best Practices – Simplifying the Complex
Getting your infrastructure right, implementing the Best Practices listed above will have many benefits to your organization including but not limited to the following:
- Improved results from having well defined objectives established and accomplishing same
- New hard dollar cost savings and profitability by executing a sourcing plan
- Fewer suppliers to meet with, set up, approve invoices for and pay
- Less confusion among management and staff as to who the designated suppliers are and who to use
- Fewer supplier contracts auto-renewing because they are identified and tracked (managed)
- Consistent information from an established quote policy in order to make the best supplier decisions
- Elimination of unexpected price increases because pricing has been locked for supplies and services
- Elimination of employees bringing on new suppliers as they now know they don’t have authority
Leading and managing a business is complicated and stressful by its very nature. There are opportunities to significantly reduce the complexity and reduce the confusion that exists in organizations by laying in some proven policies and controls…or in this case, Best Practices. From a spend management perspective, the ten (10) functions in the above matrix are key to having in place organizationally not only to reduce costs, but to simplify the business, improve controls and to reduce complexity.
The diagnostic above is built around Best Practices in spend management. If your organization employs those Best Practices, which are not difficult to implement, your organization will certainly be more cost effective, efficient and more profitable in 2017 and beyond.
Author: Doug Austin
Doug Austin is the founder and President of StrategicSource, Inc., the leading provider of Spend Management Services (strategy, spend mapping, sourcing, process improvement and audit) for the automotive and truck dealerships, and various other vertical markets. Doug is a veteran of the U.S. Marine Corps, a graduate of the University of St. Thomas, and a speaker at various conferences and 20 Groups. Doug has acquired over 30 years of line, staff and executive experience in Spend Management and Supply Chain Management in various vertical markets. Doug is also a trainer, speaker and consultant on the Spend Management, Supply Chain and Procurement disciplines.