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Bundling is a vital procurement lever to help drive cost reductions across your organization. Follow these six steps to succeed and maximize savings during the process.
In simple terms, bundling means securing standardized contract terms with the same supplier across the organization or pooling purchasing volume with one or fewer suppliers.
1. Plan Your Initiatives
To ensure the best possible process and outcome, you should always start by planning your savings initiatives. Set an overall plan, define your targets and goals, and outline the specific tasks needed to get there with deadlines and responsibilities.
2. Simple Competition or Full Sourcing Event?
To realize the bundling opportunities that you've identified, you could either:
- Conduct a "simple competition process" through renegotiations, or
- Conduct a full sourcing event (tender process)
You should always carefully consider the costs vs. benefits when selecting the appropriate measure. In many cases, utilizing a renegotiation process might be sufficient to realize a significant share of the inherent potential. But for larger spend categories, you should probably consider a structured sourcing event to extract as much of the potential as possible.
This article focuses primarily on the renegotiation process, although some insights are also highly relevant as part of a sourcing process.
3. Anchoring Across Your Business
Ensure you adequately involve all the key stakeholders in your organization throughout the process, such as management and users. For example, this could be a management executive that needs to be informed, a procurement team member you should consult with, or a technical manager with relevant insights and expertise. Internal anchoring is essential to secure the necessary progress and support.
4. Implement Efficiently and Leverage Data Insights
To drive an efficient bundling process through renegotiations, you should build an implementation template with the applicable insights and analysis. Always remember to leverage your data to tip the scale in your favor. As a part of a renegotiation process, this might be standardized supplier analytics you should highlight and present during the meetings.
5. Sell the Case!
In supplier meetings, the best negotiators are also good sellers. This is especially true when it comes to bundling, as you need to highlight, communicate, and outline what kind of growth opportunities the supplier has with you in the future. Both short-term and long-term. One question you need to ask yourself is:
Why should the supplier accommodate your demands or needs - how could this benefit them?
On the other hand, you also have to clearly state that other category suppliers will get the same opportunity (a tactical perspective). Please do not forget to provide the suppliers with details on your demands/requirements for driving future collaboration and growth. Transparency is critical - and most suppliers thrive on this.
6. Follow Up and Track Effects
The process doesn't end after the renegotiation meeting. You also need to follow up and track the initiatives, such as activities related to:
- Any internal follow-up and clarifications needed after the meeting? Always remember to keep your promises towards the suppliers.
- Evaluate updated terms and conditions from the suppliers, such as benchmarking of terms. Would it be possible to renegotiate the current, updated offer?
- Sign updated agreements and communicate internally to reduce maverick spending.
- Ensure the utilization of preferred suppliers as you advance and that purchasing volumes are adequately being "transferred".
If you have a spend management solution in place, applying procurement analytics to track metrics and goals should be relatively easy.