No matter how detailed your sourcing strategy, how competitive your tenders or how robust your negotiation, there will always be some products or commodities where you cannot fail to see price increases because of market inflation.
In such situations, savings can still be delivered, but to do so requires effective demand management by encouraging the business to change buying behaviours. This could be by switching to a cheaper product with different specifications, or by reducing or stopping product use entirely.
To identify these opportunities and subsequently deliver savings is rarely a simple task, but it is one that can present significant rewards. Below are my top three considerations for successful demand management:
In-depth analysis: identifying demand management opportunities requires a thorough and accurate understanding of what is currently being bought, to what specification and by whom in the business. This will allow direct comparisons to be made between products and the size of the opportunities estimated. While such analysis may sound obvious, the effort and challenges involved in obtaining appropriate spend data should not be underestimated.
Engaging with the business: early engagement with the business is essential to validate the opportunities identified and establish any challenges that may be encountered when implementing them. The engaged stakeholders need to have a deep technical understanding of the use of the products, as well as strong links to the end-users who will be key to delivering the benefits.
This is a prime opportunity to develop an implementation strategy: how will the demand management changes be rolled-out? What supply chain changes may be needed? Finally, what communications will be required to help make them successful?
Tracking success: once opportunities are validated and implemented, a benefits tracking process needs to be in place to ensure the demand management initiatives are being delivered. It should also identify areas of the business that may be experiencing difficulties in implementing these new initiatives so solutions can be developed. By tracking these benefits, the business is able to recognise and incentivise the success that demand management delivers.