Chief Procurement Officers and Vice Presidents of Purchasing can accelerate and deliver significantly more actual savings by focusing on RFx process. A best practice RFx process can deliver 40% more annual savings.

1. RFX SPEED TO
SAVINGS
A Best Practice RFx Process can Deliver 40% More Annual Savings
Discussion Topic: CPO Executive Roundtable Discussion
Ritz Carlton HMB CA March 2014
William Kohnen March 2014

2. Executive Summary
• Chief Procurement Officers and Vice Presidents of
Purchasing can accelerate and deliver significantly more
actual savings by focusing on RFx process.
• An efficient RFx process can deliver 40% more annual
savings
• To realize full savings need right balance of
People that know the spend categories and markets
Process which supports companywide efficiency in capturing total
benefits
Tools which support overall process and specific needs of different
spend profiles
William Kohnen March 2014

3. Annual Savings Gained or Lost
Based on RFx Time
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
$-
$50,000
$100,000
$150,000
$200,000
$250,000
0 week 4 weeks 8 weeks 12 Weeks 16 Weeks
%SavingsLost
TotalSavings
Savings First
12 Month
From RFQ
Lost Savings
% Lost
Example Based on Spend of one million and savings
potential 20%
William Kohnen March 2014

4. How to accelerate the process
Action Advantage Disadvantage Best Use
Hire a subject
matter consultant
• Only incur cost
when working on
project.
• Best Market info.
• Expensive in
absolute terms.
• Consultant
retains
knowledge and
creates
dependency.
• Consultant
controls process.
Unique and
infrequent items
that are not core to
your business
Hire a Direct
Employee
Commodity Expert
• Lower overall
cost
• Follows your
process
• More Control
• Headcount spot
used for person
with narrow
focus.
• Might be harder
to integrate into
team.
For high spend
areas core to your
business
William Kohnen March 2014

5. How to accelerate the process
Action Advantage Disadvantage Best Use
Focus on process
and develop
templates and
policies
• Can replicate
process across
categories.
• Organizational buy
in to process.
• Does not require as
many Expert Level
Category
Professionals.
• Great training
opportunity for mid
career Buyers.
• Developing and
getting company
buy in is
challenging and
must be done by
CPO or VP
Purchasing.
• Lack of Category
expertise may
sometimes not
capture full savings
opportunity.
Good for “B” level
items with high spend
but not critical and lots
of potential suppliers
Utilize Online Tools • Tools enforce and
support process.
• Added Visibility
• KPI Tracking
• Integration with
Analytics and
Enterprise
Systems.
• Tools do not
replace
knowledge.
• Bad tools divert
attention.
• Additional Cost
requiring ROI.
• Low Spend and
Low Priority
Purchasing.
• Process Support
for More Critical
Spend.
• Better use of Big
Data Analytics.
William Kohnen March 2014

6. Summary
• RFx Process itself can add or take away from total savings realized
• Responsibility for RFx process health is at the top
• Key levers for improvement: People, Process, and Tools
• Optimizing levers and process varies depending on organization
and also commonly used spend analysis methods such as Kraljic or
others.
William Kohnen March 2014