A Way of Repricing the Demand Costs
We discovered significant cost savings through changing the price of purchase orders in a recent business process assessment for a client’s Procurement function. Rechecking a requisition pricing of certain goods and/or services against the vendor’s current pricing or other reliable data source to optimize the specific item’s cost is what you do when you are repricing and so, doing this job will require more time, in which will be minimized once you have a repricer software that could possible give you an assistance when necessary. After the client implemented certain repricing recommendation, he had confirmed saving of $82,000 within four months. Read more here about repricing purchases.
A four to six week business process assessment which focuses on a business function like Procurement that seeks new business insights and quantifiable benefits to fully maximize technology investments. Looking for high impact opportunities to realize “real” savings from better processes is the goal of the process assessment, and not just looking for places to plug in new software.
A number of purchase requisitions were processed into purchase orders by our client. We found out that their purchasing software unlike the one with a certain online seller lacked the ability to easily review and consolidate similar requisitions to drive lower pricing is the problem. However, the buyers followed up with vendors to ensure they were getting the best pricing available after they have repriced three requisitions per buyer per week. To provide a sizable payback, developers have increased the repricing performance and on average, we determined that they saved a few hundred dollars per repriced requisition for about 60% of the transactions processed.
According to our interviews and calculations, increasing the number of weekly repricings from three to ten per buyer would result in a net savings of over three time the current savings which is a good news by the way.
We also recommended to the client to eliminate specific manual processes and redundant work to free up capacity for the increased repricing efforts and through that, most people doesn’t know about this fact that they should be doing a great job. We also recommended to set a baseline to measure future performance and communicate repricing results and cost savings back to requisition originators to encourage better initial pricing while not taking for granted other aspects.
The importance of this Choice
In place of the recommended ten repricings per buyer per week, the client undertook performing the six repricings after reviewing our suggested repricing goal recommendations and is starting to worry. It was confirmed by the client that a net savings of $82,500 which roughly tallies to $250,000 savings per year was obtained over the first four months which will give a new chance.
The client asked us to return to kick off their cost savings project and assist with measuring performance upon reviewing leadership.