Why Your Business Needs a Procurement Savings Tracker: Realizing Value in Every Dollar

Procurement is a major expense for most businesses, often accounting for 50-80% of company’s cost base. With profit margins tightening amid economic uncertainty, it’s more critical than ever to maximize the value of every dollar spent. An effective procurement savings tracking solution could be the key to unlocking substantial yet overlooked cost savings.

In the current procurement landscape, we daily see organizations wasting large sums due to ineffective sourcing and lack of spending visibility. Yet many fail to prioritize savings tracking, relying on manual methods like Excel or disjointed processes that provide limited insights. It’s no surprise – 79% of CPOs agree that robust savings tracking is crucial for future success but don’t know where to start.

That changes today. This article will explore:

• What savings tracking does
• Types of procurement savings
• Hidden costs of manual tracking
• Benefits of purpose-built software
• Steps to demonstrate and optimize ROI

Equipped with the right visibility, you can transform procurement’s impact on cash flow, profitability and overall performance. Continue reading to start realizing the full value of your spending.

What Does Procurement Savings Tracking Do?

Essentially, savings tracking monitors the outcomes of strategic sourcing, contract compliance and other cost-reduction initiatives. By documenting and tracking savings against targets, teams can:

• Measure performance against Targets
• Identify new savings opportunities
• Share progress with stakeholders
• Make Informed decisions on resource allocations

Without proper tracking, it’s impossible to prove – or improve – procurement’s impact over time. Teams end up reacting to issues or inaccuracies rather than strategizing based on trends and benchmarks.

What Procurement Savings Can You Track?

While savings often focus on price reductions, there are nuances teams must consider:

• Cost Avoidance Tracks prevented price increases, such as avoiding a 10% vendor renewal hike through contract negotiations. This differs from outright reductions.
• Soft vs Hard Savings – Hard savings reduce existing expenses, while soft savings avoid future cost increases through strategies like pooling supplier volumes, securing rebates, etc.

Beyond direct purchases, savings can be found across processes like inventory, transactions, specifications and more. Holistic tracking is the key to success here.

Pitfalls of Manual Tracking Methods

Many organizations default to legacy tools like Excel or Sharepoint for tracking. However, these quickly fall short of procurement’s variables and scale. Pitfalls include:

1. Accuracy – With endless manual data entry, it’s easy for errors to render savings data meaningless, skewing perceptions of performance.
2. Lack of Audit Trails – No insight into contributors, changes and approvals means limited accountability around reported figures.
3. Fragmented Processes – Between finance, procurement and suppliers, data flows suffer. There’s little standardization on how savings are defined, identified or validated across the business.
4. Time Waste – Significant resources spent maintaining complex reporting spreadsheets take away from value-add analysis. It’s not sustainable.
5. Limited Analysis – With a tilted focus on tracking figures rather than deriving insights, teams miss optimization opportunities hidden in the noise of endless rows of data.

Purpose-Built Procurement Savings Tracking Software

Leading organizations opt for integrated savings tracking tools like Etomix, which are purpose-built for procurement variables, interdependencies, and the need for speed. Cloud platforms provide:

• Central Data Repository – Consolidates related data flows into a single version of truth regarding spend, contracts, savings initiatives and outcomes.
• Configurable Tracking – Intuitive tools tailored specifically to document and validate all types of procurement savings opportunities across the pipeline.
• Automation to Minimize Manual Work– Schedule reports, ensure savings initiative updates, sync critical finance or supplier data and more without spreadsheets.
• Holistic Insights – Embedded analytics help uncover trends, drill down on outliers and identify new savings opportunities through detailed categorization and comparison.
• Collaboration – Shared visibility, alerts and commenting across finance, procurement and key stakeholders keeps everyone on the same page.

With the right software, savings tracking becomes an invaluable asset rather than an error-prone chore.

Steps to Optimize Realized Savings ROI

However, technology alone isn’t enough. Organizations must nurture a culture focused on continually maximizing the outcomes of procurement programs. Key steps include:

• Codify Clear Tracking Standards: Document guidelines aligned with finance around savings qualifications, calculations, ownership and validation to maintain consistency in reporting.
• Incentivize Compliance: Recognize and reward teams for proper tracking discipline through pulse surveys, call-outs in all company meetings, etc., and celebrate wins.
• Review Regularly: Don’t just set and forget savings plans. Maintain accountability through monthly reviews of realization rates, exploring root causes of lost value.
• Normalize Conversations Around Savings Goals: Make discussions around savings performance indicators a consistent agenda item in leadership meetings to motivate focus.

Final Thoughts: Realize Full Spend ROI

With budgets tighter than ever, no business can afford to leave savings opportunities on the table. By breaking down silos and inconsistencies around tracking through purpose-built software and cross-departmental collaboration, organizations can maximize realized value from procurement.

The ROI from enhanced visibility and control over enterprise spend can fund business growth for years to come through compounding savings. It’s time to unlock procurement’s full potential with comprehensive savings tracking capabilities tailored to today’s volatile landscape. Stop guessing and start realizing 100% of your negotiated savings value with the right tools like Etomix.