SIG University Certified Sourcing Professional (CSP) program graduate Angelica Gardner discusses how CSP modules on internal spend analysis and contract negotiation planning improved her approach to identifying cost efficiencies as a procurement buyer.
As everyone is aware, the COVID-19 pandemic has affected a large portion of the economy’s growth ability, especially in the automotive industry, with declining sales of more than 40%. Companies are having to develop strategic ways to cut costs and provide cost-saving solutions. As a buyer in the manufacturing plant, my responsibility is to identify these cost efficiencies.
To accomplish this task, SIG University's CSP program helped me recognize two areas to improve: internal spend analysis and contract negotiation planning. These areas are complementary skills that have helped me improve my approach these types of situations in the future as a procurement buyer.
INTERNAL SPEND ANALYSIS
As a new procurement agent, having followed industry market trends, company earnings and announcing changes within the organization has given me a leg up in my negotiation strategies. Assessing the environment is vital to understanding business requirements, the company’s vision and our department’s functional goals during this critical time.
In one particular situation, management did not agree with a supplier’s new budget proposal and wanted to reduce cost by an overall savings of $86,000. The lesson teaches us to gather as much data required and perform a spend analysis to determine leverage. After completing a spend analysis from the previous year, we discovered the total spend was consistent with what was done in the past.
Nevertheless, the department was determined to cut costs. Instead of reducing the workforce (layoffs), hours would be decreased. We realized an immediate cost savings of $25,000 by eliminating over-time. The department and I were able to break down the supplier’s budget further by only billing for days working on-site, which would create additional cost savings.
Unfortunately, the supplier realized that the impact would not allow them to recoup losses from the previous year but also face another loss of $91,000 in revenue. Though the company would be pleased with these cost savings measures, it would prove not to be an easy feat for the supplier.
As expected to the supplier’s dismay, they did not succumb easily to the department's counter-offer. I pinpointed areas to target savings, scoped out areas of discussions and communicated them with both parties, which were key takeaways from the SIG University lesson.
The statement of work was a bonus that allowed me to strengthen my negotiation power further. I informed the supplier of the expected performed activities set forth by the department and called out specific terms and conditions in the contract, recognizing each party’s rights. This allowed the department to implement this action and were overall pleased with the results.
Furthermore, suppliers were also expected to be directly impacted by the business decisions and with a drastic decline in car sales, it does not leave much room to negotiate. I absolutely agree that being well prepared was key to having a stronger hand in negotiations and the ability to anticipate rejections.
The Certified Sourcing Professional (CSP) program is a 10-week course that focuses on the hard and soft skills of sourcing, including strategic sourcing and outsourcing methodologies, as well as best practices in negotiations.
Hello, my name is Angelica Gardner. I am a Procurement Buyer for Honda Manufacturing of Alabama. This is a new career path for me, but I realized my accounting degrees apply to my current role. I have been with Honda for over two years now but working in Purchasing under a year. I started my career in accounting, working in financial services, government, utility, retail and manufacturing. I hope to use my past work experience to excel in the Purchasing/Supply Chain profession.