Value Creation
Do BIG Savings Mean Buyers Haven’t Been Doing their Job?
October 21, 2015
Alex Short
1 minute

This is a fascinating question which was asked on a Linkedin group recently, and it’s one I wanted to discuss.  It’s true that that purchasing is made up of many variables which never remain static, so seeing spikes in pricing is often completely normal.  But if we see a massive, and previously unrealised, saving should we blame our buyers?  Or, Do BIG savings mean buyers haven’t been doing their job? 

Thomas Edison is famously quoted as saying “there is always a better way”. Those of us in purchasing would probably completely agree.  We can always improve.  We should always improve.  Whether it’s asking the questions which challenge the status quo, such as “what if we change the process?” and “what if we use different materials?”, or simply building on skills, continuous progress is a part of growing up.

So, to go back to the question, when a previously un-made large saving is discovered we often raise our eyes to the skies asking why it wasn’t discovered earlier?  Maybe that shouldn’t be our first response.  Sometimes the saving wasn’t made because of a lack of enabling technology.  Or the pivotal relationships which made the saving, or innovation, possible didn’t exist.  So, instead of ruminating on missed opportunities maybe we should ask ourselves, could this saving have been made earlier?  Or even, should it have been made earlier?

We all love to see to see big savings, but we need to consider the possible side effects. Imagine if a purchasing team drives down costs from their chosen supplier. Sure, they make a saving, but six months down the line their supplier goes bust.  Now they’ve got a hole in their supply chain which is going to cost buckets to replace.  Plus we’ve just damaged our relationships with our suppliers, and we can no longer access the value that comes along with a deep supplier relationship.  It’s the classic one step forward, two steps back tango.

So, unless we want to grab our dancing shoes, we should value a long-term, holistic outlook.  We should think about the value of tomorrow, not just the value of today.  Most importantly, we must remember that there are more ways to save than just a price decrease.

Maybe a big saving does mean previous shortfalls, but it can also mean that a business is moving in the right direction, and those on the ground are doing a sterling job.  Let’s not criticise the past, let’s praise those improving the future. But most importantly lets look to other opertunities rather then just having a cost focus. Lets change up our KPI’s and try something different.

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Alex Short is Founder of Old St Labs he is passionate about building the next generation of business software. He is recognised as one of procurements thought leaders.
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