Cost Reduction Checklist: Opportunity Assessment

How can you get the most out of your cost reduction program? Kicking off with a solid Opportunity Assessment is key: this should build a strong business case and implementation plan, with an understanding of the expected return on investment.

Efficio has created this Opportunity Assessment for cost reduction checklist, to be read alongside our cost reduction guide, to help business and procurement leaders secure a robust target with clear bottom line impact, involving the business in an achievable and agreed delivery plan. 

Why Opportunity Assessments Matter

• Does your management team understand ‘why now’ on a procurement reset?
• Do you and your key sponsors agree on the goals of the business case from the Opportunity Assessment?
• Do they understand what they will get out of the Opportunity Assessment: a clear, robust business case, implementation plan, and return on investment view of a program?

Importance of spend visibility

• Is spend categorized in a common market facing structure to allow you to see fragmentation of spend, and drill down by category or business units?
• Is this spend trusted by the business and used to build business cases?

Is there opportunity?

• Is your team using fact-based analysis to build pragmatic estimates and show opportunity?
• Do you have a clear list of key initiatives and a good understanding of the uncertainties and dependencies?
• Have you got recent, relevant benchmarks within and without your organization for key spend sizes and cost points?
• Have you reviewed your top contracts in high potential categories – including all amendments?
• Did your team have robust documentation on recent projects, allowing you to see what has been addressed and what still remains?

How to build a plan

• Do you have a documented initiative pipeline of all the opportunities, laying out the sequence, time needed, and benefit realization profiles?
• Does your pipeline include 3-8 key initiatives, each saving a material amount for your business (e.g. more than 0.25-0.5% of your total third party cost base?)
• Do you understand what is required to deliver the key in-scope opportunities?
• Have you considered any key trigger points for key initiatives?
• Are you and your key stakeholders confident you have the resources required to deliver this plan?
• Can you summarize your pipeline in a way that gives a clear target and timeline for delivery? Could your key stakeholders describe it?

Are you ready for change?

• Are you clear on current capability and capacity of your function and the gaps to deliver your targeted pipeline?
• Do you and stakeholders agree on what additional elements are required to deliver the plan?
• Are your stakeholders willing to sponsor key initiatives and give resources required from outside procurement?
• Is your business excited about the opportunity and reassured by the plan?

To maximize its impact, click on the button below to download the pdf version of this checklist and pass it round a few of the leaders in the team, then reconvene to see if you all agree on how your last Opportunity Assessment (or your upcoming one) is running.

We’re here to help

If you would like to dig deeper into any gaps in how your organization has planned cost reduction opportunities, please contact us by filling out the form on the Opportunity Assessment service page. We are eager to support you in adopting this differentiating model and secure business buy-in for cost reductions.