Digital Dealer - December 2017 - 19

MENT - New suppliers
must be vetted and only
added with senior management approval and
then to fill a need in the
preferred supplier list.
5. OBJECTIVES - An annual cost reduction objective expressed in dollars is
established, implemented
and measured monthly to
track against the plan.
6. AUDITS - Supplier audits are planned, executed
and the compliance results
are reported across the
organization.
OPPORTUNITY

SPEND MANAGEMENT ASSESSMENT
Item Area

Question

1.

Spend

2.

Spend

3.
4.
5.

Spend
Spend
Spend

6.
7.

Suppliers
Suppliers

8.
9.
10.
11.

Suppliers
Suppliers
Suppliers
Controls

12.

Controls

13.

Controls

14.

Controls

15.
16.

Controls
Staff

How much did the company spend on supplies and services
in 2017?
How did that amount change over 2016? Increase or
decrease?
What is the explanation for the change?
What is your forecasted spend for 2018?
Out of a potential of 130, how many expense categories did
your organization spend money in this year?
How many "active suppliers" are in your payables files?
How many more suppliers are active in your files vs.
expense categories you purchase in? (i.e. 400 suppliers -
100 expense categories)
How many new suppliers did you add in 2017?
How many suppliers did you drop in 2017?
What is the explanation for the difference?
Are written purchasing policies in place throughout the
organization and followed?
Does your staff have a list of your "preferred" or designated
suppliers in each expense category?
Are your suppliers locking their pricing for 12-24 months
consistently when you quote or negotiate pricing?
Are supplier contracts and agreements tracked by due date
to prevent auto renewals?
Are supplier audits conducted on your biggest suppliers?
Is your staff creating a prioritized sourcing plan for 2018?

17.

Staff

18.

Staff

19.

Staff

20.

Staff

21.

Results

22.

Results

23.

Results

Since profits are the
lifeblood of any organization, keep in mind that the
spend management function can either erode your
levels of profitability with
too much expense...or it
can enhance your level of
profitability by reducing the
level of expenses. Some
metrics to keep in mind as
you plan for 2018:
	Annual spend for supplies and services - 6%
of total sales on average
($100MM in sales = $6MM
in spend)
	Expense categories to
manage - 130 total...most
dealers managing 95 on
average
	Cost reduction opportunity - 25% of spend
if spend management is
centralized (25% of $6MM
= $1.5M)
	New Profits - $1.5MM

24.

Results

25.

Results

As year-end is approaching, it is a good
time to step back and
review overall company
performance. Did the
organization achieve all
of the early objectives? If
profitability levels were not
met, it might be a good
time to review your spend
management function.
The Spend Management
Assessment can help you

pinpoint the gaps in your
policies, processes and
controls and help you get
those on track for 2018.
Remember, centralization,
taking control of the commitment process is key to
regaining control across
an organization. Once that
control is centralized and
plans are established and
executed, a new source

SUMMARY

Yes/No/
Comment

Is your staff developing a core list (broad list of items that
you purchase) for quoting or is your team sourcing items
separately?
Is your sourcing staff obtaining three quotes on repetitive
and/or spot buys before making supplier selections?
Does your staff vet and qualify suppliers before adding them
to your approved supplier list?
Does your organization have guidelines in place pertaining
to that which an employee can accept from a supplier (gifts,
cash, entertainment)?
How many of the 130 expense categories were quoted and
pricing renegotiated this year?
How much did you earn this year in cash-back rewards
using a credit card to pay suppliers?
How often did your management team review progress on
expense reductions during the year?
What was the total annual cost savings achieved this year
through new quoting and renegotiation?
What kind of expense reductions or new profits do you
expect from sourcing activities in 2018?

of profitability will be
achieved setting you up
for a better 2018.
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 30+ years
of line, staff and executive
experience in spend
management and supply
chain management in various
vertical markets.EMAIL:
daustin@strategicsource.
com

D I G I TA L D E A L E R . C O M

DECEMBER 2017

19
http://www.DIGITALDEALER.COM
Table of Contents for the Digital Edition of Digital Dealer - December 2017
