![]() ![]() So, surely it makes an economic, business case to: That’s my speciality – and it fits perfectly with the Pareto principle and taking it to the next level to form a power rule. In short, 80/20, or even 64/4, is the ace card I always play when trying to convince sceptical stakeholders of the benefits of vendor consolidation. Whether that focus is on traditional expense reduction targets, DPO improvements, on-time deliveries, supplier relationship management (SRM) and so on. (Let’s assume for argument’s sake that we’re looking at vendors by spend, but it doesn’t necessarily have to be.) ![]() If we’re talking about tail spend management, for example, then what this means in practical terms is if you’re applying the Pareto principle squared to strategically manage JUST the top 4% of your vendors, that will help you drive 64% of your results. Take the 20% and then apply the 80/20 rule to this also. The other twist on this is when you start to apply the power law and perform 80/20 squared. Are you using your email inbox as your de-facto “to do” list? Or are you consciously seeking out whom you should be building strategic alliances with? Who should you really be in front of to drive the most value and achieve your objectives. Are they the ones who you need to be building alliances with, or just the ones who shout the loudest or who like working with you? If they’re not, get rid of them.Ģ0% of your stakeholders account for 80% of your time spent serving your internal business partners. What if you had fewer vendors, or someone else who manages all of the noise while you get on with driving value to the business?Ĩ0% of the late deliveries or quality problems come from 20% of your vendors. That’s 80% of the issues being caused by non-core vendors. ![]() Is this a productive use of your precious time?Ĩ0% of your invoice volume is represented by the long tail of vendors who make up the last 20% of your spend. How much time are you spending developing and partnering with them? And now check how much time you spend dealing with day-to-day communication with the long tail of irrelevant suppliers. The resource and energy saved can give your organisation extra capacity to concentrate on what’s important, whilst eliminating or ignoring what’s not.īecause at the end of the day, administrative work and tactical day-to-day issue resolution is the task of admin assistants and junior staff, not highly paid senior managers.Ģ0% of vendors are the key partners who account for 80% of your total spend. The following statements quickly give clarity around how to free up white space and to unlock value. This is actually one of the most powerful laws which can be applied.įor me, the most interesting aspect is the insight and validation it gives you to stop spending too much of your time and resource on “busy work”, to the detriment of where your real value lies. Let’s look, for example, at the Pareto principle to observe opportunities and patterns when it comes to managing our supply base, especially on separating core vendors from tail spend. But what about how it can be applied to common problems in the procurement space.
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