PSC The Procurement Cost Savings Compendium A Catalog of Category Specific Savings Tactics

Procurement Strategy Council™
Strategic Research • Q4 2006 Edition
The Procurement
Cost-Savings Compendium
A Catalog of Category-Specific Savings Tactics
Proven Tactics in
Cost Management for
Proven Cost-Savings Tactics • Consulting and Professional
Services
Category-Specific Results • Energy
Quick Diagnostic Cost-Savings Checklist • HR Benefits
• Information Technology
• Marketing and Advertising
• MRO Supplies
• Outside Legal Counsel
• Real Estate and Facilities
• Third-Party Logistics
• Travel and Entertainment
© 2006 Corporate Executive Board. All Rights Reserved.

Procurement Strategy Council
Managing Analyst
Arthur Sadiq
Procurement Strategy Council Contributing Senior Analyst
www.psc.executiveboard.com Marc Kelly
Project Manager
Washington, D.C., United States Doug Eckstein
Telephone: +1-202-777-5000
Fax: +1-202-777-5100 Managing Director
Brian Powilatis
London, United Kingdom
Telephone: +44-(0)20-7632-6000 Executive Director
Mikel Durham
Fax: +44-(0)20-7632-6001
New Delhi, India

Telephone: +91-124-417-8500
Fax: +91-124-417-8501 Creative Solutions Group
Graphic Design Specialist
Katie Levitt
Contributing Designers
Suzanne Finn
Chris Helming
Contributing Editor
Tracy Banghart
Note to Members
This project was researched and written to fulfi ll the research requests of several members of the Corporate Executive Board and as a result may not satisfy the
information needs of all member companies. The Corporate Executive Board encourages members who have additional questions about this topic to contact
the Board staff for further discussion. Descriptions or viewpoints contained herein regarding organizations profi led in this report do not necessarily reflect
the policies or viewpoints of those organizations.
Confidentiality of Findings
This document has been prepared by the Corporate Executive Board for the exclusive use of its members. It contains valuable proprietary information belonging
to the Corporate Executive Board, and each member should make it available only to those employees who require such access in order to learn from the
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please return this document and all copies in your possession promptly to the Corporate Executive Board.
Legal Caveat
The Procurement Strategy Council has worked to ensure the accuracy of the information it provides to its members. This report relies upon data obtained from
many sources, however, and the Procurement Strategy Council cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, the
Procurement Strategy Council is not engaged in rendering legal, accounting, or other professional services. Its reports should not be construed as professional
advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither the Corporate
Executive Board nor its programs are responsible for any claims or losses that may arise from a) any errors or omissions in their reports, whether caused by
the Procurement Strategy Council or its sources, or b) reliance upon any recommendation made by the Procurement Strategy Council.
© 2006 Corporate Executive Board. All Rights Reserved. PRC16YBZHD

Table of Contents
How to Use This Guide • vii
Cost-Savings Tactics Checklist • viii
Executive Summary • xi
Consulting and Professional Services Cost-Savings Tactics p. 1
I. Demand Management
• Internet-Based Training—Corning
• Standardized Consulting Contracting—Royal Mail
• Managing Consulting Demand—3Com
II. Contract Labor Management
• Labor Contract Information Management System—EDS
• Central Contract Labor Staffing Portal—Panasonic
• Workforce Management System—Shell
Energy Cost-Savings Tactics p. 5

I. Fuel Consumption Management
• Low-Cost Fuel Purchasing System—ServiceMaster
• Petrol Cost Awareness Program—Onyx*
II. Energy Hedging
• Heating Oil Driven Diesel Hedging—Hershey’s
III. Fixture Upgrades
• Ambient Lighting Conversion Lighting Upgrades—Zeta*
• In-Store Natural Light Utilization System—Costco
IV. Energy Tracking and Management
• Web-Based Energy Asset Management System—Retail*
• Retail Energy Tracking—Ockham*
• Computer Monitor Energy Management System—Pitney-Bowes
HR Benefits Cost-Savings Tactics p. 9

I. Managing Supplier Performance
• Supplier Scorecard—Rhodia
II. Preventative Care
• Self-Care Guide—Berk-Tec
III. Managing User Demand
• Benefits Spend Disaggregation—Alpha*
• Mail-Order Prescription Policy—GM
• Extended Illness Allowance—Inova
* Pseudonym.
Information Technology Cost-Savings Tactics p. 13
I. Application Development Outsourcing
• Mixed Offshore Portfolio—Deutsche Bank
• Offshore Development Center—Standard Chartered
II. Streamlined Project Management
• Flexible IT Project Staffing Model—Harrah’s
• Alternative Development Project Planning—St. George
• Web-Based Project Management Portal—Citigroup
• End-User Driven IT Solutions—Nestle
III. IT Asset Management
• Application Reuse Repository—Epsilon*
• Equipment Retirement and Reuse Center—Edwards AFB
• Internal Equipment Recycling Process—Merrill Lynch
IV. Reducing Maintenance Cost
• Prioritized Application Maintenance Process—Amalfi*
• Application License Use Audit—Dow Corning
• Application Subscription Payment Model—Genmar
• Subscription Licensed Warehouse System—Whole Foods
• Standardized Software Vendor Negotiations—Primedia
V. Hardware and Software Consolidation
• Thin Client Computing System—Oakland County
• Standardized PC Equipment Upgrade Policy—VITA
• Standard Hardware Reverse Auctions—Novartis
• Standardized Client Software Build—Epsilon*
• Server Capacity Utilization Assessment—Raytheon
• Standardized Help Desk Service Operations—Starbucks
• Enterprise-Wide Single Sign-On System—Kappa*
• VoIP System—Lloyd’s
• Enterprise Instant Messaging System—St. Croix
VI. Improved Sourcing Discipline
• CFO Laptop Approval Process—Yum! Brands
• Needs Based Storage Policy—Volvo
• Used Equipment Purchasing Policy—E-Loan
• Unified IT Sourcing Platform—3Com
• Vendor Solvency Scanning Procedures—Ravello*
* Pseudonym.
Marketing and Advertising Cost-Savings Tactics p. 25
I. Improved Sourcing Discipline
• Performance-Based Advertising Agency Compensation—Michelin
• Marketing-Informed Advertising Sourcing Process—Company A*
• Print Production Compliance Management—Company B*
• Marketing Sourcing Spend Rationalization—Eli Lilly
II.Specifications Management
• Marketing Collateral Rationalization—Merck
MRO Supplies Cost-Savings Tactics p. 29

I. Supplier-Managed Inventory
• Decentralized Hazardous Materials Purchasing—United Airlines
II. Streamlining Maintenance Response
• Enterprise Maintenance Help Desk Hot Line—Sheffield *
• Janitorial Staff Assignment Assessment—Genentech
• Maintenance Supplier Suggestion Box—Lockheed Martin
III. Consortium Buying
• International Consortium Sourcing—Company F *
• Third-Party Packaging Negotiations—Company A*
Outside Legal Counsel Cost-Savings Tactics p. 33

I. Increasing Service Provider Competition
• Third-Party Outside Counsel Search Service—Lehman Brothers
• Cost Management Based Compensation Incentives—FannieMae
• Benchmarked Legal Fee Negotiation Sessions—Intuit
• Flat-Fee Assignment System—COA
II. Service Provider Unbundling
• Outside Counsel Cost and Task Disaggregation—DuPont
• Outside Counsel Shipping Contract Piggybacking—CEB
• Outside Counsel Travel Guidelines—CEB
• Flat-Fee Legal Contract Structures—Company F*
III. Increasing Staffing Flexibility
• Contracted Legal Risk Triage
• Attorney Time-Share Arrangements
* Pseudonym.
Real Estate and Facilities Cost-Savings Tactics p. 37
I. Workspace Consolidation
• Shared Telecommuter Workstations—Telco
• Real Estate Portfolio Rationalization—Dun and Bradstreet
• Telecom Line Utilization Audit—Onyx*
• Sublease Portfolio Analysis—JPMorgan Chase
• Work Space “Hoteling” Policy—Accenture
• Soft-Copy File Conversion Process—Thatcher and Company *
II. Transaction Efficiency
• Customer Satisfaction Surveys—The World Bank
• Real Estate Transaction Extranet—Donau*
III. Consumption Management
• Standard Office Furniture Catalog—Highfield
• Office Signage Standardization—Aetna
Third-Party Logistics Cost-Savings Tactics p. 43

I. Performance Management
• Carrier Scorecard Program—MeadWestvaco
II. Reconfiguring Materials Management
• Local Scrap Recycling Network—Azure*
• Inbound Materials Management Redesign—Kodak
III. Spend Disaggregation
• Logistics Spend Disaggregation—Huffman*
Travel and Entertainment Cost-Savings Tactics p. 47

I. Virtual Meeting Tools
• New-Hire Application E-Learning—Cisco
• Lead Prequalification Virtual Meetings—Network Intelligence
• In-house Instructor Training—Roadway
II. Standard Sourcing Guidelines
• All-in-One Travel Planning Web Site—Verizon
III. Leveraging Latent Assets
• Shared-Space Operating Agreement—Beta*
Bibliography • 51
Order Form • 57
* Pseudonym.
vii
How to Use This Guide

This compilation contains various tactic summaries to help procurement executives address a variety of category
spend items.
1. Category Cost-Savings Checklist

This diagnostic provides a comprehensive checklist of the cost-savings ideas presented in this compendium,
summarized into single-line titles for easy reference. By browsing this list, senior procurement executives can
benchmark their own cost-savings efforts and identify unexploited areas of potential cost-savings opportunities
for their organizations.
2. Savings Versus Complexity Rankings

The Procurement Strategy Council provides a summary analysis of the tactics explored in this study to provide
guidance as to the implementation of complexity and cost-savings impact for the business. The results of this
analysis are included in a two-by-two matrix at the beginning of each section that places the tactics into four
categories: Quick Hits, Buyer Beware, Low-Hanging Fruit, and CPO Leverance Zone.
Examples of Category Management Tactics: Savings Versus Complexity Trade-Offs

Procurement Strategy Council Analysis
Low-Hanging Fruit CPO Leverage Zone

Low-Cost Fuel Purchasing System p. 6 Offshore Development Center p. 14
Application Reuse Repository p. 16 Heating Oil-Driven Diesel Hedging p. 6
Carrier Scorecard Program p. 44 Outside Counsel Travel Guidelines p. 35
High
Flat-Fee Legal Contract Structures p. 35 Real Estate Transaction Extranet p. 40
Workforce Management System p. 3 Marketing Sourcing Spend Rationalization p. 27
Standard Office Furniture Catalog p. 41 Managing Consulting Demand p. 2
Cost-
Savings International Consortium Sourcing p. 31
Impact
Quick Hits Buyer Beware
Application Subscription Payment Model p. 18 VOIP System p. 21
Ambient Lighting Conversion Upgrades p. 7 Soft Copy File Conversion Process p. 39

Low Internet-Based Training p. 2
Computer Monitor Energy Management System p. 8
Logistics Spend Disaggregation p. 45
Central Contract Labor Staffing Portal p. 3
Shared Telecommuter Workstations p. 38
Office Signage Standardization p. 41
Low High
Complexity of Implementation
viii
Cost-Savings Tactics Checklist

I. Consulting and Professional Services III. HR and Benefits
1. Internet-Based Training p. 2 1. Supplier Scorecard p. 10
2. Standardized Consulting Contracting p. 2 2. Self-Care Guide p. 10
3. Managing Consulting Demand p. 2 3. Benefits Spend Disaggregation p. 11

Labor Contract Information
4. 4. Mail-Order Prescription Policy p. 11
Management System p. 3
5. Central Contract Labor Staffing Portal p. 3 5. Extended Illness Allowance p. 11
6. Workforce Management System p. 3
II. Energy
1. Low-Cost Fuel Purchasing System p. 6
2. Petrol Cost Awareness Program p. 6
3. Heating Oil–Driven Diesel Hedging p. 6
Ambient Lighting Conversion

4. Lighting Upgrades p. 7
5. In-Store Natural Light Utilization System p. 7
6. Web-Based Energy Asset Management System p. 8
7. Retail Energy Tracking p. 8
Computer Monitor Energy

8. Management System p. 8
ix

IV. Information Technology IV. Information Technology (Continued)
1. Mixed Offshore Portfolio p. 14 22. VoIP System p. 21
2. Offshore Development Center p. 14 23. Enterprise Instant Messaging System p. 21
3. Flexible IT Project Staffing Model p. 15 24. CFO Laptop Approval Process p. 22
4. Alternative Development Project Planning p. 15 25. Needs-Based Storage Policy p. 22
5. Web-Based Project Management Portal p. 15 26. Used Equipment Purchasing Policy p. 22
6. End User–Driven IT Solutions p. 16 27. Unified IT Sourcing Platform p. 23
7. Application Reuse Repository p. 16 28. Vendor Solvency Scanning Procedures p. 23
8. Equipment Retirement and Reuse Center p. 16
9. Internal Equipment Recycling Process p. 17 V. Marketing and Advertising
10. Prioritized Application Maintenance Process p. 17 Performance-Based Advertising

1. Agency Compensation p. 26
11. Application License Use Audit p. 17
Marketing Informed Advertising
2. Sourcing Process p. 26
12. Application Subscription Payment Model p. 18
3. Print Production Compliance Management p. 26
13. Subscription Licensed Warehouse System p. 18
4. Marketing Sourcing Spend Rationalization p. 27
14. Standardized Software Vendor Negotiations p. 18
5. Marketing Collateral Rationalization p. 27
15. Thin Client Computing System p. 18
16. Standardized PC Equipment Upgrade Policy p. 19
17. Standard Hardware Reverse Auctions p. 19
18. Standardized Client Software Build p. 20
19. Server Capacity Utilization Assessment p. 20
20. Standardized Help Desk Service Operations p. 20
21. Enterprise-Wide Single Sign-On System p. 20

x

VI. MRO Supplies VIII. Real Estate and Facilities
1. Decentralized Hazardous Materials Purchasing p. 30 1. Shared Telecommuter Workstations p. 38
2. Enterprise Maintenance Help Desk Hot Line p. 30 2. Real Estate Portfolio Rationalization p. 38
3. Janitorial Staff Assignment Assessment p. 30 3. Telecom Line Utilization Audit p. 38
4. Maintenance Supplier Suggestion Box p. 31 4. Sublease Portfolio Analysis p. 39
5. International Consortium Sourcing p. 31 5. Work Space “Hoteling” Policy p. 39
6. Third-Party Packaging Negotiations p. 31 6. Soft Copy File Conversion Process p. 39
7. Customer Satisfaction Surveys p. 40
VII. Outside Legal Counsel 8. Real Estate Transaction Extranet p. 40
1. Third-Party Outside Counsel Search Service p. 34 9. Standard Office Furniture Catalog p. 41

Cost-Management Based 10. Office Signage Standardization p. 41
2. Compensation Incentives p. 34
3. Benchmarked Legal Fee Negotiation Sessions p. 34
IX. Third-Party Logistics
4. Flat-Fee Assignment System p. 34
Outside Counsel Cost and 1. Carrier Scorecard Program p. 44
5. Task Disaggregation p. 35
2. Local Scrap Recycling Network p. 44
Outside Counsel Shipping
6. Contract Piggybacking p. 35
3. Inbound Materials Management Redesign p. 44
7. Outside Counsel Travel Guidelines p. 35
4. Logistics Spend Disaggregation p. 45
8. Flat-Fee Legal Contract Structures p. 35
9. Contracted Legal Risk Triage p. 36

X. Travel and Entertainment
10. Attorney Time-Share Arrangements p. 36
1. New Hire Application e-Learning p. 48
2. In-House Instructor Training p. 48
3. All-in-One Travel Planning Web Site p. 48
4. Lead Prequalification Virtual Meetings p. 49
5. Shared Space Operating Agreement p. 49

xi
Executive Summary: The Indirect Category Sourcing Imperative
In the face of falling savings rates, effective category management presents an opportunity to drive expanded cost
savings in an uncertain economic environment. To support procurement executives in this cost-cutting imperative,
we have assembled this new compendium of cost-savings tactics, which provides both new ideas in already
penetrated categories as well as tactics that may help engage reluctant stakeholders in underpenetrated categories.
Don’t Fall Behind on Your Savings Targets

Most companies face falling savings rates… …fail to extract full category potential…
Direction of Change in Savings Rate Category Savings Opportunities
Year-on-Year, Percentage of Respondents Savings as a Percentage of Spend
16%
16%
No Change 14%
14%
13%
13% 12%
12%
9%
11% 11%
9% 9%
54% 37%
Decrease Increase
Consulting Legal Marketing HR
Benefi ts
n = 35. n = 49.
Potential Savings
Average Expected Savings
…and face significant roadblocks in capturing remaining opportunities

Categories Actively Managed by Procurement
Percentage of Respondents
Challenge #1
Find new savings
opportunities in previously Challenge #2
sourced categories. Engage stakeholders in
82%
underpenetrated categories
78% 78% to increase spend influence.
71%
53%
42%
35%
14%
MRO Travel IT/ Outsourced Consulting Marketing HR Legal

Telecom Services and Benefi ts
Advertising
n = 66.
Source: Member Survey; Procurement Strategy Council research.

xii
Executive Summary: A Multimillion Dollar Opportunity
The tactics profi led in this compendium represent effective methods to drive cost savings, from rapid
implementation/quick-win opportunities to long-term enterprise-level savings campaigns. Taken together, these
tactics have delivered more than $1.5 billion in documented cost savings.
What’s on the Table

Select Category Tactics Covered in the Compendium
Spend Category Initiative Results

$28 million in immediate
Standardized PC negotiation savings, $500
Information Technology
Materials Purchasing million expected savings
over 5 years
*
Flat-fee Legal * Company F reduced legal
Outside Legal Counsel
Contract Structures spend by 20%
Centralized Fuel Service First-year savings

Energy
Management generation of $3.5 million
Performance-based $70 million in savings

Marketing and Advertising
Compensation Metrics generated
Cross-Docking Resulted in $500 million

Distribution and Logistics
Inventory Management in cost savings
Consulting and Standardized 40% reduction on total

Professional Services Consulting Contracts consulting spend
Self-Service, Reduced the cost of

Real Estate and Facilities
Standardized Signage internal signage by 50%
Virtual Meetings
20% reduction in travel
Travel and Entertainment Through
spend
Webconferencing
* Pseudonym.
A Catalog of Category-Specific Savings Tactics 1
Consulting and Professional

Services Cost-Savings Tactics
The Procurement Strategy Council has collected consulting and professional services cost-savings
tactics to provide visibility into the range of applications cost-savings opportunities available. The
two-by-two matrix below provides guidance on each tactic’s relative difficulty of implementation
and economic impact.
Consulting and Professional Services Cost-Savings Tactics: Savings Versus Complexity Ranking

Labor Contract Information Management System p. 3 Standardized Consulting Contracting p. 2
Workforce Management System p. 3 Managing Consulting Demand p. 2
High
Cost-
Savings
Impact Quick Hits Buyer Beware
Central Contract Labor Staffing Portal p. 3
Internet-Based Training p. 2
Low
Low High
2 The Procurement Cost-Savings Compendium
Consulting and Professional Services
Demand Management—Standardizing requisition processes, justification requirements, contract terms,

and user options helps control demand and dramatically reduce costs
Savings
Impact
X
Internet-Based Training Implementation
Complexity
Corning Plans to Save $2 Million Through Internet-Based Training for Applications Employees
Corning introduced an Internet-based ERP-training program for applications employees and estimates saving
$2 million due to the elimination of classroom-based training.1
Savings
Impact
Implementation
Complexity
Standardized Consulting Contracting
Royal Mail Reduces Consulting Spend by 40% Using Standardized Contracting

Royal Mail improved its internal control over consulting demand by implementing a structured approval and
contracting process. Procurement at Royal Mail provides management with a standard template to develop
a thorough justification for consulting requisitions. Additionally, Procurement creates a panel of approved
consultants and standardizes 80% of contract terms and conditions to ensure transparency and help manage
compliance with the new policies. As a result, Royal Mail achieved a 40% reduction in total consulting spend.2
X
Savings
Impact
Implementation
Complexity
Managing Consulting Demand
3Com Manages Consulting Demand, Reducing Costs in First Year

3Com mandated that business units clearly justify the business need for a consultant within 60 days or risk
cancellation of the engagement. 3Com then established a firmwide uniform contract framework for all consulting
engagements and required that all exceptions to consulting spend procedures have CFO or CPO approval. 3Com
reduced the consulting supplier base by 92% and costs by 81% in the first year.3
Contract Labor Management—Improving visibility into organizations’ needs and acquisitions efficiency
reduces management and staffing costs
Savings
Impact
Implementation
Labor Contract Information Management System Complexity
EDS Uses Knowledge Management to Increase Visibility and Savings in Contract Labor
EDS consolidates all contract labor procurement into one enterprise-wide tool, the Bank of Knowledge information
management system. This system ensures visibility into contract labor spend and locks in compliance with spend
policy. Centralizing contract labor into this system delivers transaction cost savings of 75% and reduces time-to-fi ll
lapses by 50%.4
Savings
Impact
X
Central Contract Labor Staffing Portal Implementation
Complexity
Panasonic Division Saves $750,000 Annually with Central Staffing Portal for Contract Labor
Panasonic’s IT services department previously hired consultants and temporary employees from approximately
30 sources. To reduce the management costs stemming from highly decentralized hiring practices, the organization
implemented a central staffing portal. The portal allows managers to post requisitions online and review all
résumés. In the first year of use, the system yielded savings of $750,000.5
X
Savings
Impact
Implementation
Complexity
Workforce Management System

Shell Centralizes and Automates Workforce Management System and Lowers Payments to Contractors
by 28%
Shell Oil Products US deployed a Web-based system that enables the firm to automate its contingent workforce
management process, including supplier qualification, request for proposals, time-and-expense entries, and
invoicing. Prior to the implementation, the firm used several disparate systems to manage temporary and contract
labor, resulting in a suboptimal allocation of expenditures. During the installation process, Shell also worked to
rationalize its vendor base and optimize the procurement process. Shell has leveraged the new capabilities to receive
volume and early payment discounts from its labor suppliers, decreasing payments to new contractors by 28%.6
Energy Cost-Savings Tactics

The Procurement Strategy Council has collected energy cost-savings tactics to provide visibility
into the range of applications cost-savings opportunities available. The two-by-two matrix below
provides guidance on each tactic’s relative difficulty of implementation and economic impact.
Energy Cost-Savings Tactics: Savings Versus Complexity Ranking
Low-Cost Fuel Purchasing System p. 6 Heating Oil–Driven Diesel Hedging p. 6
Retail Energy Tracking System p. 8

High
Cost-
Savings
Ambient Lighting Conversion Upgrades p. 7 In-Store Natural Light Utilization System p. 7
Web-Based Energy Asset Management System p. 8

Low Petrol Cost Awareness Program p. 6
Computer Monitor Energy Management System p. 8
Low High
Energy
Fuel Consumption Management—Reducing fuel usage through improved purchase policy and
user awareness
Savings
Impact
Low-Cost Fuel Purchasing System Implementation
Complexity
ServiceMaster Develops Single Fuel Card and Low-Cost Service Station List, Saves Millions
ServiceMaster’s strategic sourcing group compiled a spend sourcing database and found significant savings
opportunities around three critical areas: purchasing fuel from lowest-cost service stations, eliminating cash
purchases, and leveraging company spend to obtain volume discounts. ServiceMaster instituted a single fuel card
for purchases, allowing for detailed transactional records. The group then developed scorecards to outline savings
goals and potential savings from low-cost service stations, including a list of low-cost stations from which to refuel.
Within one year, ServiceMaster’s fuel purchasing system generated $3.5 million in savings.7
Savings
Impact
ONYX* X
Implementation
Complexity
Petrol Cost Awareness Program
Onyx Co. Creates Fuel Efficiency Awareness and Saves €100,000 Annually
Onyx Co. analysis uncovers that petrol stations vary prices throughout the day and predictably raise prices
during peak traffic hours. Onyx’s Procurement organization launches a company-wide awareness campaign to
convince employees to refuel fleet vehicles at off-peak traffic times. Alternate fueling schedules enable Onyx to take
advantage of lower petrol costs, saving the company over €100,000 annually.8
Energy Hedging—Creating strategies to limit energy cost exposure
X
Savings
Impact
Heating Oil Driven Diesel Hedging Implementation

Complexity
Hershey’s Develops Diesel Hedging Strategy, Avoids $4.3 million in Surcharges

Procurement at Hershey’s developed a fuel hedging strategy to offset the risk of rising diesel fuel surcharges.
Faced with the challenges of not having an exchange-based futures market in diesel and having never traded in
this indirect commodity, category managers at Hershey’s evaluated scores of historical pricing relationships of
petroleum products to diesel and found a suitable hedge in home heating oil. Using this information, Hershey’s
hedged its position against diesel surcharges, avoiding $4,290,000 of possible charges in the process.9
* Pseudonym.
Fixture Upgrades—Substituting more energy-efficient lighting fixtures to reduce usage costs
Savings
Impact
X
Implementation
Complexity
Ambient Lighting Conversion Lighting Upgrades
Zeta Insurance Upgrades Lighting, Estimates Savings of $200,000 to $300,000 per Year
To improve lighting quality and reduce energy costs, Zeta Insurance implements an ambient lighting conversion
process which upgrades fluorescent light fi xtures from magnetic ballasts and T-12 lamps to electronic ballasts and
environmentally friendly T-8 lamps. The new lighting saves between $200,000 and $300,000 a year, delivering a
three-year pay back period.10
Savings
Impact
X
In-Store Natural Light Utilization System Implementation
Complexity
Costco Store Saves $23,000 per Year with Skylights and Photocell-Based Controls
Management at Costco seeks to increase light levels in its warehouse-style stores to create an environment that
is conducive to shopping, while reducing operating costs. In response, real estate planners at Costco integrate
skylights into its stores, which cover approximately 4% of roofing area and are distributed evenly over the shopping
area. The skylights, which are composed of acrylic-clad fiberglass, maximize natural light transmission with
minimum heat gain and are approximately 40% more efficient than traditional acrylic-only skylights. Costco also
implements photocell-based day lighting controls in its stores, which selectively activate/deactivate electric lights
based on lighting needs throughout the day. Annual energy savings are 1.5 kWh/square foot or $23,000 per year,
per store.11
* Pseudonym.
Energy Tracking and Management—Tools to increase visibility into energy consumption patterns and
enable improved management of usage to reduce costs
Savings
Impact
X
Implementation
Web-Based Energy Asset Management System Complexity
Retail Company Deploys Web-Based Asset Management Tool, Saves Almost $1 Million Annually
Retail Company increases energy efficiency by deploying a Web-based, real-time energy asset-management system
that enables management to control all HVAC equipment at each individual store. The new software enables a 40%
reduction in energy consumption due to the more efficient HVAC controls, creating a $775,000 annual savings.12
* X
Savings
Impact
Retail Energy Tracking Implementation
Complexity
Ockham Reduces Energy Usage by 6% Using Tracking Software

Ockham uses a modified off-the-shelf software package to monitor its energy usage at seven locations around the
country. The service provider creates Web-accessible reports within 5 to 10 minutes of remote metering. These
reports are used to identify potential areas for reductions in energy expenditures. For example, on one occasion,
the reports show a spike in energy use at certain times of the day due to forklifts recharging simultaneously. This
prompts Ockham to vary recharging schedules to reduce peak loads. Within the first year, Ockham succeeds in
reducing its energy usage by 6% without making changes to its existing equipment.13
Savings
Impact
X
Implementation
Computer Monitor Energy Management System Complexity
Pitney Bowes Uses Energy Star Computer Monitor Management System and Saves
$160,000 Annually
Pitney Bowes’ effort to implement computer monitor power management at its 10,500 computer workstations in
the United States is complicated by the use of multiple versions of the Microsoft Windows operating system. In
conjunction with an enterprise-wide upgrade to Windows 2000, Pitney Bowes partners with the Department of
Energy’s Energy Star program to install a software program to manage computer monitor power usage for the
entire company. The system sets computer monitors to a lower-power “sleep” mode after a period of inactivity.
The company’s information technology staff implements the system using Energy Star’s EZ Save software in less
than one day. As a result of its participation in the program, Pitney Bowes reduces energy usage by 2 million kWh
annually, which equates to $160,000 in annual savings.14
* Pseudonym.
HR Benefits
Cost-Savings Tactics
The Procurement Strategy Council has collected HR benefits cost-savings tactics to provide
visibility into the range of applications cost-savings opportunities available. The two-by-two
matrix below provides guidance on each tactic’s relative difficulty of implementation and economic
impact.
HR Benefits Cost-Savings Tactics: Savings Versus Complexity Ranking

Supplier Scorecarding p. 10 Mail-Order Prescription Policy p. 11
High
Cost-
Savings
Self-Care Guide p. 10 Extended Illness Allowance p. 11
Benefits Spend Disaggregation p. 11
Low
Low High
HR Benefits
Managing Supplier Performance—Driving procurement discipline in the management of supplier

performance to reduce cost and increase quality
Savings
Impact
Implementation
Supplier Scorecarding Complexity
Rhodia Saves Millions by Implanting Supplier Scorecards for Health Plan Providers
To harness the negotiating expertise of their procurement team, the benefits personnel of Rhodia, a specialty
chemical company, collaborated with its purchasing personnel to more effectively manage health plan supplier
negotiations. The purchasing experts emphasized supplier scorecards and the management of ongoing supplier
expectations. Benefits personnel then applied these proven purchasing principals to health plan purchasing. During
this process, Rhodia established limitations for each executive’s scope of influence, generating millions in cost
savings.15
Preventative Care—Reducing health care costs by promoting preventative treatment in the user
community
Berk • Tec
Savings
Impact
X
Self-Care Guide Implementation
Complexity
Self-Care Guides Save Berk-Tec $39 per Employee in Treatment Costs

To promote healthier lifestyles and educate employees about health issues, Berk-Tec, a manufacturing firm
in Lancaster, Pa., used a self-care guide. This guide promoted smart medical decisions with regard to seeking
treatment for different illnesses. The self-care guide helped reduce doctor visits, emergency room visits, and other
health care service use. Berk-Tec saved $39 per employee and overall firm health care costs decreased 24.3% from
the previous year.16
Managing User Demand—Disaggregating spend and suggesting substitutions for care options drives
significant cost reductions
Savings
Impact
X
Implementation
Complexity
Benefits Spend Disaggregation
Procurement at Alpha Company Reduces Benefits Spend by Segmenting User Needs
Alpha Company procurement proposed development of a new benefits program based on segmented end-user
needs to its HR function. It then surveyed active employees and retirees to discover preferences that could be
segmented. As a result of the segmentation of benefits packages based on end-user needs, Alpha Company was able
to reduce benefits costs by 11%.17
Savings
Impact
Implementation
Complexity
Mail-Order Prescription Policy
GM Saves $80 Million by Mandating Mail-Order Prescription Drugs

To save money on prescription drugs, General Motors, the nation’s largest purchaser of private health care,
implemented a mandatory prescription drug mail-order requirement. Beginning in 2004, all GM employees,
retirees, and dependents use mail-order pharmacies to fi ll prescriptions for long-term treatment of chronic diseases
such as asthma, diabetes, and high blood pressure. GM’s health plan members contribute a $9 co-pay for a 90-day
supply. Members not using mail-order pharmacies pay 100% of drug costs at retail pharmacies. GM has realized
$80 million in savings since 2004.18
Savings
Impact
X
Implementation
Complexity
Extended Illness Allowance
Inova Reduces Unscheduled Sick Days by 70% Through Extended Illness Allowance
To encourage employees to more prudently allocate their sick and vacation days, Inova Health System
implemented a paid-time-off policy, giving employees 23 days off per year in their PTO bank. The bank grows
with employee tenure and offers a 10-day extension in the event of extended illness. Inova also uses this system to
remain competitive with other area hospitals. Since instituting the program, Inova has seen a 70% reduction in
unscheduled sick days.19
* Pseudonym.
The Procurement Strategy Council has collected information technology cost-savings tactics to
provide visibility into the range of applications cost-savings opportunities available. The two-
by-two matrix below provides guidance on each tactic’s relative difficulty of implementation and
economic impact.
Information Technology Cost-Savings Tactics: Savings Versus Complexity Ranking

End-User-Driven IT Solutions p. 16 Flexible IT Project Staffing Model p. 15
Application Reuse Repository p. 16 Alternative Development Project Planning p. 15
Prioritized Application Maintenance Process p. 17 Mixed Offshore Portfolio p. 14
High Standardized PC Equipment Upgrade Policy p. 19 Offshore Development Center p. 14
Standard Hardware Reverse Auctions p. 19 CFO Laptop Approval Process p. 22
Web-Based Project Management Portal p. 15 Standardized Help Desk Service Operations p. 20
Subscriptions Licensed Warehouse System p. 18 Unified IT Sourcing Platform p. 23
Standardized Software Vendor Negotiations p. 18
Cost-
Savings
Application License Use Audit p. 17 Enterprise-Wide Single Sign-On System p. 21
Equipment Retirement and Reuse Center p. 16 VoIP System p. 21
Thin Client Computing System p. 19 Enterprise Instant Messaging System p. 21
Standardized Client Software Build p. 20
Server Capacity Utilization Assessment p. 20
Low
Needs-Based Storage Policy p. 22
Used-Equipment Purchasing Policy p. 22
Vendor Solvency Scanning Procedures p. 23
Application Subscription Payment Model p. 18
Internal Equipment Recycling Process p. 17
Low High
Application Development Outsourcing—Leveraging low-cost labor while maintaining in-house

oversight of critical processes and people
Savings
Impact
Implementation
Mixed Offshore Portfolio Complexity
Deutsche Bank Uses Mixed Offshore Portfolio, Slashes Development Costs by 20%, and Minimizes Risk
Deutsche Bank employs a diversified portfolio approach to global sourcing to minimize the risk of outsourcing
complex trading platforms while taking advantage of lower cost development opportunities. Narrowing their list of
desired offshore locations based on projected savings actualization, geographic proximity, and domain knowledge,
the company decided to outsource to vendors in Canada and the United Kingdom while establishing a captive
offshore development center (ODC) in Russia. The multiple sourcing structure offers Deutsche Bank the flexibility
to mitigate vendor lock-in risks while sending higher-risk projects to its ODC in Russia. By migrating more than
one-third of its applications development workforce to low-cost locales, the company cut developer unit costs by
more than 20%.20
Savings
Impact
Implementation
Offshore Development Center Complexity
Standard Chartered Creates Offshore Development Center, Reports Savings of 10%

Standard Chartered offshored the development and maintenance of its application portfolio to access a high-quality
developer pool while achieving significant cost savings. The company launched a four-year program to relocate
70% of its applications development and support work to India and Malaysia. While establishing its presence in
offshore locations through wholly owned ODCs, the company continues to staff in-house employees on more
sensitive projects. By transferring applications development and maintenance to an ODC instead of an equivalent
third-party vendor, Standard Chartered reduces overhead costs and data security risks, resulting in an estimated
cost savings of 10%.21
Streamlined Project Management—Improving project planning and execution through improved

understanding of potential trade-offs, knowledge sharing, and end-user engagement
Savings
Impact
Implementation
Flexible IT Project Staffing Model Complexity
Harrah’s Implements Flexible Staffing Model, Cuts Project Staffing Time by 83% and
Trims Project Spend by 11%
To improve project delivery, Harrah’s Entertainment formed a “Flexible Staffing Pool” of 30 IT employees to staff
short-term, three- to six-month projects. In addition to enabling rapid resource deployment, the flexible staffing
arrangement provided pool staff with short rotational development experiences. Using the flexible staffing pool the
company reduced the time required to staff projects from 14 days to 2 and reduced total project spending by 11%.22
Savings
Impact
Implementation
Alternative Development Project Planning Complexity
St. George Bank Presents Lower Cost-Development Options to Business Partners, Avoids $1.5 Million in
Application Development Costs
St. George Bank dedicates a team to evaluate IT project proposals and create alternative design scenarios to
help business leaders compare trade-offs in total project costs against various levels of application functionality.
By presenting lower-cost solutions and completing project life-cycle costing up front, the company achieved
greater application project cost discipline. Improved resource planning and application delivery has allowed the
organization to reduce application project costs by $1.5 million.23
X
Savings
Impact
Web-Based Project Management Portal Implementation

Complexity
Citigroup Develops In-House Web Portal for Project Portfolio Management, Saves $200 Million
Citigroup built an in-house Web portal for project portfolio management (PPM) to improve performance,
knowledge sharing, and standardization. Finding no third-party products with the ability to standardize the
development process on a global scale, the company developed the Web portal internally. With the PPM system
managing 20,000 IT projects across the company, Citigroup has achieved $200 million in savings.24
Savings
Impact
Implementation
End-User Driven IT Solutions Complexity
Nestle Involves End Users in Project Planning to Achieve Buy-In, Saves $325 Million
To combat end-user resistance to new applications and reduce rollout support costs, Nestle USA kicked-off its “One
Nestle” user-readiness campaign. The campaign emphasized managing change and achieving universal buy-in
by including users in project planning, conducting regular end-user surveys, and updating budget projections
frequently. As a result of Nestle’s user-readiness campaign, the company estimates savings of $325 million by
reducing help desk calls, improving change management efforts, and increasing end-user adoption.25
IT Asset Management—Maximizing the usable life of existing hardware and software investments
ε * X
Savings
Impact
psilon
Company
Implementation
Application Reuse Repository Complexity
Epsilon Company Implements Application Reuse Initiatives, Saves $32 Million by Accelerating Speed-to-
Market of Applications
Epsilon Company builds new applications by replicating and gathering parts of existing applications. To promote
application reuse, Epsilon created a small team dedicated to developing a reuse framework and quantifying the
benefits of reuse across the enterprise. To foster the creation of a central, reusable asset repository, the company
publicly recognizes and financially compensates both suppliers and consumers of such assets. Epsilon’s reuse
program has accelerated speed-to-market of applications, resulting in savings of $32 million.26
Savings
Impact
X
Implementation
Complexity
Equipment Retirement and Reuse Center
Edwards Air Force Base Establishes Central Equipment Retirement and Reuse Center, Saves $830,000 Over
Three Years
To achieve greater visibility into equipment utilization across an organization with high staff turnover, Edwards
Air Force Base established a central “IT Turn-In Center.” Previously, when end users disposed of equipment when
moving to new positions or due to equipment obsolescence, they were responsible for fi ling extensive equipment
retirement paperwork. Now end users are only required to make one call to the “Turn-In Center,” which handles
all paperwork and reporting. By improving visibility into the equipment life cycle the group has seen a significant
increase in hardware reuse that has lead to end user equipment savings of $830,000 during its first three years.27
* Pseudonym.
Savings
Impact
X
Implementation
Internal Equipment Recycling Process Complexity
Merrill Lynch Saves $500,000 Annually with Central Equipment Retirement and Reuse Portal
To promote equipment reuse and simplify retirement administration, Merrill Lynch implemented an online
equipment retirement and reuse portal. The portal provides a forum for end users to post information on
equipment slated for retirement, allowing other end users to claim used equipment for reuse. The system allows
end users to gain immediate access to required equipment and as a result Merrill Lynch saved $500,000 in
equipment procurement costs within the first year of the portal’s implementation.28
Reducing Maintenance Cost—Rightsizing applications licenses and selecting appropriate negotiation and
fee structures to reduce overall applications maintenance costs
Savings
Impact
X
Prioritized Application Maintenance Process Implementation
Complexity
Amalfi Co. Restricts Support of Lower-Value Applications, Reduces Annual Maintenance Spend by 10%
To drive the company’s maintenance cost-reduction plan, Amalfi classified its applications portfolio by strategic
business value, minimizing spending on low-value applications through revising SLAs. Amalfi also encouraged
business units to be financially responsible for future strategic IT investments by having business units fund
enterprise architecture, business process reengineering, and e-business projects, which serves as an effective
incentive for reducing maintenance spending. As a result of its multipronged strategy, Amalfi met their goal of
reducing maintenance spend by more than 10% year over year from 2000 to 2003.29
Savings
Impact
X
Application License Use Audit Implementation
Complexity
Dow Corning Renegotiates Applications Licenses to Save $1 Million per Year

After purchasing several thousand licenses for an application system, Dow Corning determined that there were
only several hundred active connections. To nullify the costly maintenance agreement that covered thousands of
unused licenses, Dow Corning agreed to an increasing rate for future license reactivations. To provide ongoing
system maintenance support that had previously been contracted to the vendor, the company established an in-
house maintenance team. While the deal allows the vendor to charge higher future license fees, the company saved
$1 million annually in maintenance costs immediately by eliminating unused licenses.30
* Pseudonym.
Savings
Impact
X
Implementation
Application Subscription Payment Model Complexity
Genmar Saves $310,000 in Annual Maintenance Fees and Internal Staff Salaries with Subscription Licensing
To eliminate annual software maintenance fees, Genmar, a leading boat manufacturer, migrated its payroll
application to a subscription payment model in a hosted environment with vendor Ultimate Software.
Previously, under a traditional licensing model, Genmar was paying an annual maintenance fee of $100,000. The
subscription-hosted license also eliminated annual in-house system management salary costs of $150,000 and
annual application-related support expense of $60,000. Genmar achieved total annual cost savings of $310,000 by
switching to a subscription-hosted solution.31
Savings
Impact
Implementation
Complexity
Subscription Licensed Warehouse System
Whole Foods Eliminates Annual Maintenance and Consulting Fees with Subscription Licensing
To avoid the risk of unsuccessful long-term agreements and the annual maintenance fees of traditional perpetual
licensing, Whole Foods Market negotiated a subscription licensing model for its data warehouse system with Retek.
Since subscription licensing requires the company to renew its software usage contract with the vendor each year,
Whole Foods has eliminated the risk of large up-front investments in applications potentially unsuitable for long-
term use. Whole Food’s power to cancel the subscription license at any point also provides an incentive for the
vendor to increase responsiveness to deployment challenges. Whole Foods also eliminated the annual maintenance
fees paid to vendors, which usually cost between 17 to 20% of initial traditional perpetual license fees.32
X
Savings
Impact
Standardized Software Vendor Negotiations Implementation

Complexity
Primedia Reduces Annual Maintenance Fee Charges with Standardized Negotiation Strategy
To reduce annual maintenance fees, which commonly amount to between 17% and 20% of initial license costs,
Primedia uses a standard negotiating procedure with its software vendors. The company conducts monthly
software audits and quarterly reviews with business units to discover cases of license underutilization, scaling
down its maintenance requirements accordingly. Primedia also combines its used and unused software licenses to
present a large total license volume to the vendor, thereby achieving volume discounts for maintenance fee rates.
The company then combines this discounted maintenance fee rate, priced as a percentage of up-front license
fees, with the audit-produced reduced maintenance requirement level to drive down the total expense of software
maintenance agreements. To maximize bargaining leverage, Primedia also enters maintenance fee negotiations
at the end of vendors’ financial quarters, when vendors are under increased pressure to close contracts. By
implementing a standard maintenance fee negotiation strategy, Primedia reduces its license expenses.33
Hardware and Software Consolidation—Increasing leverage and efficiency through firmwide systems
standardization
Savings
Impact
X
Implementation
Complexity
Thin Client Computing System
Oakland County Implements Thin Client Computing, Saves More Than $1.1 Million
Faced with the high cost of replacing outdated desktops while migrating from Windows NT to Windows XP, the
government of Oakland County, Michigan, deployed a thin client solution. The thin client architecture enables
software license management at the server level, providing the county with complete visibility into software
utilization. As a result, the county achieved immediate license savings by scaling down license coverage to match
actual utilization levels and also reduced the time and cost of deploying the operating system upgrade. The
Oakland County government saved more than $1.1 million through improved license and desktop management
and lower up-front hardware costs.34
Savings
Impact
Implementation
Complexity
Standardized PC Equipment Upgrade Policy
VITA Implements Standard PC Build, Estimates Savings of $500 Million

Driven by excessive duplication of IT contracts and service agreements resulting from fragmented PC procurement
and irregular PC refresh cycles, the Virginia Information Technologies Agency (VITA) decided to implement a
standard PC build across the organization. In the seven-year initiative, VITA expects to upgrade 60,000 desktop
computers at an annual rate of 25%. The agency is evaluating best-of-breed hardware and software and plans to
standardize operating systems, virus software, and security applications for each PC. Subsequently, the agency
plans to update the standard PC configuration for each PC refresh cycle every three to five years. VITA expects the
project to save $500 million over five years, with $28 million in immediate contract renegotiation savings.35
X
Savings
Impact
Standard Hardware Reverse Auctions Implementation

Complexity
Novartis AG Reduces PC Procurement Costs by 17% Through Purchase of Standard Hardware

via Reverse Auction
Novartis AG determined that an online reverse auction would be the most effective forum for final negotiations
in its desktop refresh initiative. The company used an initial Request for Proposal (RFP) process to receive initial
pricing information from Original Equipment Manufacturers (OEMs), eventually selecting three PC OEMs and
eight peripheral OEMs to participate in the reverse auction. Because elements of the bid, such as break/fi x, image
loading, and asset tagging, were quantified as part of the total acquisitions costs, suppliers understood exactly how
their prices compared to rivals. After completing the reverse auction, Novartis AG realized a procurement savings
of 17%.36
ε *
Savings
Impact
psilon
Company X
Implementation
Complexity
Standardized Client Software Build
Epsilon Saves $4 Million Annually by Adopting Standard Client Build

To reduce the time, cost, and complexity of deploying new hardware to its user base of more than 60,000, Epsilon
consolidated from 14 different client builds to one. The company now equips desktop technicians with a single CD
that includes all the components required to build any of the 91 desktops or laptops the company supports. The OS
image contains only enough software to connect the PC to the network; once connected, the client downloads all
drivers and tools from “platform packs” stored on the company’s network. Hardware rollouts, previously requiring
more than four months of planning, can now be executed in about four weeks. Epsilon reports more than
$3 million per year in cost savings directly attributed to the standardized client build and an additional $1 million
in reduced labor costs.37
Savings
Impact
X
Server Capacity Utilization Assessment Implementation
Complexity
Raytheon Aircraft Saves $500,000 Through Server Consolidation

To reduce lease and support costs while improving server utilization rates, Raytheon Aircraft consolidated its
servers. Previously, the company commonly ran one application on each of its servers, but by combining two or
three applications onto each server Raytheon Aircraft was able to reduce the number of required servers by 30%.
As a result, the company avoided unnecessary hardware leasing costs and simplified server support needs, yielding
savings of $500,000.38
X
Savings
Impact
Implementation
Complexity
Standardized Help Desk Service Operations
Starbucks Consolidates Help Desk Operations, Reduces Administrative Costs by 75%

To reduce the administrative costs and inefficiencies of a distributed help desk, Starbucks moved to a centralized
shared services model. The new help desk model created a single-service operation running on one technology,
replacing the multiple service operations that ran on a paper-based system previously in place at the company. Help
desk response time has been reduced by more than two-thirds, and Starbucks cut the number of required help desk
staff, resulting in an immediate 75% cost reduction.39
* Pseudonym.
Kappa Corporation *
Savings
Impact
X
Implementation
Complexity
Enterprise-Wide Single Sign-On System
Kappa Corporation Implements Enterprise-Wide Single Sign-On System, Saves More Than
$1 Million Annually
Kappa’s outsourced help desk experienced a very high call volume because end users were logging on to an average
of six or seven applications, each with a unique user name and password combination. To reduce the number
of user names and passwords assigned to employees, Kappa Corporation rolled out a Web-based single sign-on
system. The company decided to tie all Web-enabled applications as well as applications with LDAP support to
Kappa’s Tivoli Access Manager to provide one access point and reduce help desk calls for password resets. Kappa’s
end users can also sign on to legacy applications with the same user name and password that they use to sign on to
the new portal. Kappa estimates savings of more than $1 million dollars annually through a reduction in password-
related help desk calls.40
Savings
Impact
X
VoIP System Implementation
Complexity
Lloyd’s of London Estimates $5.7 Million Total Cost Savings Due to VoIP Implementation
Lloyd’s of London completed the implementation of a $2 million VoIP system that allows data and voice to be
transmitted over a single cable, and also allows end users to access voice mail through their PCs. The single system
simplified Lloyd’s in-house network management and improved overall service. Implementation of the Cisco
VoIP system was managed by Lloyd’s in-house IT group and systems integrator BT Syntegra. Company executives
estimate savings of $3.6 million due to lower telecommunication service costs and $5.7 million in total savings over
four years.41 Savings
Impact
X
Implementation
Complexity
Enterprise Instant Messaging System
St. Croix Casinos and Hotels Deploys Enterprise Instant Messaging, Cuts Annual Long-Distance Telephone
Costs by 36%
To cut costs associated with particularly heavy long distance telephone activity, St. Croix Casinos and Hotels
deployed an Instant Messaging (IM) solution. The company recognized that three of its sites accounted for a
majority of the company’s total long distance telephone charges and in response deployed enterprise IM software
from Ipswitch at the three sites. As a result of enterprise IM utilization, the company has realized an annual savings
of 36% on total long distance telephone charges.42
* Pseudonym.
Improved Sourcing Discipline—Establishing a standardized, transparent sourcing and approval process

to significantly reduce end-user spending
Savings
Impact
Implementation
Complexity
CFO Laptop Approval Process
Yum! Brands Involves Business Unit Heads and CFOs in the Laptop Approval Process and Cuts Costs
by $10 Million
To discourage nonessential requests for expensive laptops when desktops would suffice, individual laptop requests
at Yum! Brands are approved by a business unit head or CFO. Yum! Brands reported that the initiative has reduced
laptop requests by 50% and is projected to save the company $10 million.43
Savings
Impact
X
Needs Based Storage Policy Implementation
Complexity
Volvo Implements Needs-Based Storage Policy and Automated Storage Archiving, Cuts Annual Storage Costs by
More Than $2.5 Million
Volvo introduced well-defined storage policies and automated storage archiving to cut costs associated with
the superfluous use of high-cost media, especially networked storage. The company discovered that much of its
application-related data and many of its employees’ fi les were being unnecessarily stored on high-performance
media. In response, Volvo laid out explicit appropriate storage usage guidelines to its employees. The company then
introduced an archiving function through which data that has not been accessed for a predetermined period is
automatically archived onto a less-expensive storage medium. Volvo reports that one business unit alone has saved
$2.5 million in annual storage costs as a result of selective archiving.44
Savings
Impact
X
Used Equipment Purchasing Policy Implementation
Complexity
E-LOAN Saves 25% to 30% on Hardware Purchases by Procuring Used IT Equipment via eBay
To cut hardware purchasing costs, E-LOAN acquired used equipment through eBay online auctions. The company
purchased a Sun E4500 server, with an original selling price of $60,000, for $20,000. E-LOAN has also used
eBay for purchasing Cisco and 3Com routers and switches, as well as Sun servers with preinstalled CheckPoint
firewall software. E-LOAN’s use of eBay online auctions resulted in cost savings of roughly 25 to 30% on hardware
procurement costs.45
Savings
Impact
Implementation
Complexity
Unified IT Sourcing Platform
3Com Creates Standard IT Sourcing Process, Realizes Cost Savings of 10%

3Com established a formal sourcing process to standardize and control IT spending. Previously, 3Com’s informal
procurement environment of maverick purchasing resulted in a fragmented outsourcing structure with many
overlapping suppliers. 3Com’s IT staff now works with the corporate procurement organization to create detailed
cost worksheets to determine baseline internal costs of providing IT services. These worksheets serve as a
framework for gathering supplier cost data through a competitive due diligence process that acts as the basis for
supplier negotiations. After submitting initial bids, competing suppliers hold simultaneous negotiations for each
aspect of the outsourcing effort. These negotiation strategies enabled the IT group to greatly reduce the original
values of supplier bids; in one instance, reducing a bid by more than 20% resulted in a total IT budget cost
reduction of 10%.46
Ravello Company *
Savings
Impact
X
Vendor Solvency Scanning Procedures Implementation
Complexity
Ravello Company Saves $1 Million with Vendor Solvency Scanning Procedures

Ravello uses vendor solvency scanning to attain transparency into the health of its vendors and benefit from
contract renegotiation opportunities. The firm allots two research analysts in the IT procurement team to conduct
continuous due diligence of vendors using various financial, industry, and analyst reports. The analysts regularly
monitor vendors to detect insolvency and renegotiation opportunities. In one instance, the analysts acted on a
report predicting that a particular vendor would have difficulty meeting its quarterly revenue estimates and used
the opportunity to renegotiate the contract at preferential rates, which led to a savings of $200,000. In another
instance the firm saved $800,000 when it detected financial difficulty with its disaster recovery vendor. The
company realized an immediate $1 million cost savings from the two instances.47
* Pseudonym.

The Procurement Strategy Council has collected energy cost-savings tactics to provide visibility
into the range of applications cost-savings opportunities available. The two-by-two matrix below
provides guidance on each tactic’s relative difficulty of implementation and economic impact.
Marketing and Advertising Cost-Savings Tactics: Savings Versus Complexity Ranking

Marketing Collateral Rationalization p. 27 Performance-Based Advertising Agency Compensation p. 26
Print Production Compliance Management p. 26
Marketing Sourcing Spend Rationalization p. 27
High
Cost-
Savings
Impact
Quick Hits Buyer Beware
Marketing-Informed Advertising Sourcing Process p. 26
Low
Low High
Improved Sourcing Discipline—Increasing returns from marketing and advertising suppliers through
improved understanding of cost structures, negotiations, and performance management
Savings
Impact
Performance-Based Advertising Agency Compensation Implementation
Complexity
Michelin Links Agency Compensation to Performance to Drive More Than $70 Million in Savings
Michelin consolidates its media spend with one supplier and realigns compensation to performance-based
metrics. Working with the media supplier, Michelin arranges performance metrics around advertising cost and
effectiveness, supplier economics, joint innovation, and press compliance. Michelin increases profit margins for the
supplier as their performance improves, allocating incentives on a sliding scale. Michelin generated more than $70
million in spend savings using this system.48
Savings
Impact
X
Implementation
Complexity
Marketing-Informed Advertising Sourcing Process
Company A Establishes Process to Engage Marketing Spend Early, Saves $5 Million

Procurement at Company A brought in consultants to train procurement staff in marketing terminology,
benchmark prices, and industry standards to overcome initial credibility challenges. Procurement then established
a cross-functional council with Marketing to discuss strategic sourcing, cost breakdowns, and negotiations. Finally,
Procurement instituted a system of stakeholder review to allow key stakeholders a voice in the sourcing process.
After successfully involving procurement in the sourcing process, Company A saved more than $5 million in
advertising and marketing spend.49
* X
Savings
Impact
Implementation
Complexity
Print Production Compliance Management
Company B Improves Compliance Through Print Production Exception Documentation

After implementing a strategic sourcing process to narrow its print vendor supply base, Company B instituted a
system of reporting print purchases from non preferred vendors. Company B used this documentation to hold
business unit leaders accountable for compliance, driving compliance rates from 30% to 80%.50
* Pseudonym.
Savings
Impact
Implementation
Marketing Sourcing Spend Rationalization Complexity
Eli Lilly Generates $40 Million in Savings Through Marketing Sourcing Discipline
Eli Lilly procurement introduced the company marketing and brand planning process into its system of sourcing
opportunity prioritization, identifying areas of improvement in spend rationalization. The process generated
greater than 12% spend reduction in all categories and reduced marketing spend by $40 million.51
Specifications Management—Reducing variation in marketing collateral to drive cost savings and

efficiency improvements
Savings
Impact
Implementation
Marketing Collateral Rationalization Complexity
Merck Saves Millions by Rationalizing Marketing Using Standards Catalog

Merck created a “Catalog of Standards” to guide new product introduction decisions and decrease packaging
variation with existing products. The catalog allows marketing to influence product variety in a manufacturing-
friendly manner, and consists of global standards and regional catalogs. Merck’s initiative generated more than
$20 million in savings.52
MRO Supplies
The Procurement Strategy Council has collected MRO supplies cost-savings tactics to provide
impact.
MRO Supplies Cost-Savings Tactics: Savings Versus Complexity Ranking

International Consortium Sourcing p. 31 Enterprise Maintenance Help Desk Hot Line p. 30
Maintenance Supplier Suggestion Box p. 31 Decentralized Hazardous Materials
Third-Party Packaging Negotiations p. 31 Purchasing p. 30
High
Cost-
Savings
Janitorial Staff Assignment Assessment p. 30
Low
Low High
MRO Supplies
Supplier-Managed Inventory—Reducing costs of carrying inventory through supplier agreements to carry

and manage inventory
Savings
Impact
Decentralized Hazardous Materials Purchasing Implementation
Complexity
United Airlines Rationalizes MRO Spend, Saves Nearly 20% of the Category’s Spend
United Airlines, rationalized a major MRO spend area, hazardous chemicals. Under the program, the company
rationalized the hazardous chemical supply base to a few key suppliers, with two suppliers covering 75 to 80%
of spend. The airline then implemented a supplier-managed inventory system at each site, requiring suppliers to
maintain a constant 30-day supply of all products. The company saved $150,000 equivalent to nearly 20% of the
category’s spend annually through lower prices, transportation expenses, and labor costs.53
Streamlining Maintenance Response—Improving the cost and efficiency of maintenance request

responses
Sheffield * X
Savings
Impact
Company
Enterprise Maintenance Help Desk Hot Line Implementation

Complexity
Sheffield Company Reduces Maintenance Costs by 20% Using Facilities Help Desk
Sheffield Company’s facilities management provider establishes a company-wide help desk for maintenance
requests. Employees request maintenance service by dialing an 800 number. The consolidated approach leverages
the facility management provider’s network of repair professionals and reduces maintenance cost by 20%.54
Savings
Impact
X
Janitorial Staff Assignment Assessment Implementation
Complexity
Genentech Saves $100,000 Annually by Improving the Functionality of Its Janitorial Staff
Genentech learns from its pharmaceutical-industry benchmarking consortium that it is spending more than its
peers on small contracting jobs. The company traditionally hires contractors for small projects such as interior
painting and changing light bulbs. Genentech reassigns these tasks to its 120-person janitorial staff, which can
perform the same functions at much less expense. In addition, the janitors already work during non-office hours,
which helps minimize disruption to employees. The associated savings total $100,000 per year.55
* Pseudonym.
Savings
Impact
Implementation
Maintenance Supplier Suggestion Box Complexity
Lockheed Martin Uses Benchmarking Results to Negotiate Lower Maintenance Costs

Industry consortium benchmarking data inform Lockheed Martin that its maintenance costs are considerably
higher than those of its peers. They communicate the discrepancy to their outsourced maintenance service provider
and ask for suggestions to remedy the situation. The vendor presents several ideas to lower costs, including a flex
cleaning program, whereby only areas that have been used get cleaned. Implementing this and other suggested
changes reduces maintenance costs from approximately $0.85 to $0.47 per square foot.56
Consortium Buying—Increasing spend leverage through buying partnerships to reduce purchase prices
* X
Savings
Impact
Implementation
International Consortium Sourcing Complexity
Company F Sources MRO Items Through International Consortium, Saves 15%

Company F saved more than 15% after sourcing a range of high-volume consumable goods, including MRO items,
through an international consortium. Consortium membership provided the firm with access to both lower prices
and new suppliers. Company F maintained the same supplier for several items but received a substantial discount
through consortium membership. Company F sourced other items, including paint and electrical equipment,
through new suppliers accessed via the consortium.57
* X
Savings
Impact
Implementation
Complexity
Third-Party Packaging Negotiations
Company A Centralizes Negotiations with Third-Party Management, Reduces Packaging Spend by 10%
Company A chose a third-party management structure to conduct negotiations, reducing corrugated spend
firmwide by 10%. In addition, Company A created a buying consortium with other companies, providing access to
national suppliers and higher levels of service from corrugated packaging vendors.58
* Pseudonym.

The Procurement Strategy Council has collected outside legal counsel cost-savings tactics to
provide visibility into the range of applications cost-savings opportunities available. The two-
economic impact.
Outside Legal Counsel Cost-Savings Tactics: Savings Versus Complexity Ranking
Outside Counsel Cost and Task Disaggregation p. 35 Outside Counsel Travel Guidelines p. 35
Flat-Fee Legal Contract Structures p. 35 Cost Management–Based Compensation Incentives p. 34

High Flat-Fee Assignment System p. 34
Cost-
Savings
Third-Party Outside Counsel Search Service p. 34
Contracted Legal Risk Triage p. 36

Low Outside Counsel Shipping Contract Piggybacking p. 35
Benchmarked Legal Fee Negotiation Sessions p. 34
Attorney Time-Share Arrangements p. 36
Low High
Increasing Service Provider Competition—Improving visibility and focus on provider cost

competitiveness and maximizing leverage to drive cost reductions
Savings
Impact
X
Third-Party Outside Counsel Search Service Implementation
Complexity
Create Competition Through Third-Party Outside Counsel Search Service

Lehman Brothers Limited retains a third-party search service to successfully find new outside attorneys, thereby
decreasing in-house counsel search time, reducing outside legal costs, and instilling in its core law firms a
heightened sense of competition.59
Savings
Impact
Cost Management–Based Compensation Incentives Implementation
Complexity
Motivate Attorneys to Monitor Legal Costs Through Compensation-Based Incentives

Fannie Mae’s general counsel introduced compensation-based incentives to motivate in-house attorneys to monitor
legal costs effectively; all attorney bonuses are based, in part, on how well they control outside legal costs.60
Savings
Impact
X
Implementation
Benchmarked Legal Fee Negotiation Sessions Complexity
Compare Outside Counsel Costs to Negotiate Fee Reductions

Recognizing that outside counsel may have widely divergent fee and disbursement schedules, Intuit Legal creates a
document listing each of its primary law firms’ fees and costs. This simple template offers transparency to business
clients and can be used by the legal department in conversations with its law firms to negotiate greater concessions
and meaningful discounts.61
X
Savings
Impact
Flat-Fee Assignment System Implementation

Complexity
Create Flat-Free Structures Based on Historical Cost Data

Coachmen Industries uses historical cost data to create flat-fee schedules for various stages (e.g., discovery) of
particular types of legal matters, thereby eliminating the need for invoice review, ensuring predictable legal
spending, and forcing outside counsel to bear the cost of inefficiency.62
Service Provider Unbundling—Disaggregating legal fees into subcategories to identify areas for cost
reduction via alternate sourcing arrangements
1
X
Savings
Impact
Implementation
Outside Counsel Cost and Task Disaggregation Complexity
Break Down Legal Matters by Discrete Tasks and Evaluate Costs Independently
DuPont Legal segments outsourced matters into their component tasks, collects data to determine which tasks law
firms perform inefficiently, and requires outside counsel to outsource to preselected non-law firm suppliers all tasks
that these suppliers are better positioned to provide, thereby generating substantial cost savings.63
Savings
Impact
X
Implementation
Outside Counsel Shipping Contract Piggybacking Complexity
Leverage Corporate Discounts for Law Firm Shipping

Corporations typically obtain greater discounts than outside counsel on shipping costs (e.g., FedEx, UPS, DHL);
thus, outside counsel’s access to the company’s discounts can reduce expenses.64
Savings
Impact
Implementation
Outside Counsel Travel Guidelines Complexity
Extend Corporate Travel Guidelines to Outside Counsel

Law departments may arrange for their outside counsel to use the company’s travel agents and obtain sizeable
discounts. As an ancillary benefit, outside counsel automatically conform to the company’s travel guidelines
(e.g., limited business class travel).65
2
X
Savings
Impact
Implementation
Flat-Fee Legal Contract Structures Complexity
Company F Reduces Legal Spend by Introducing a Flat-Fee Structure

Procurement at Company F suggested the introduction of a flat-fee suit assignment system to help manage an
expanding caseload. Procurement segmented cases based on their suitability for the system, highlighted the need
for bringing a particular suit under the flat-fee structure, and allocated low-complexity case assignments through a
user-friendly electronic system. Company F’s legal expenses have fallen by 20% as a result.66
1
E.I. du Pont de Nemours and Company.
2
Pseudonym.
Increasing Staffing Flexibility—Allocating work effectively across in-house and outside counsel to
maximize resource efficiency
Savings
Impact
X
Implementation
Contracted Legal Risk Triage Complexity
Transfer Work to Independent Contractors to Create Staffing Flexibility

Legal departments can employ independent contractors for smaller, lower-risk work. For example, retaining
contract attorneys can reduce costs for review of documents in discovery or transactional due diligence.67
Savings
Impact
X
Implementation
Complexity
Attorney Time-Share Arrangements
Use Attorney Time-Share Arrangements to Maximize Flexibility
To manage headcount constraints, the peaks and valleys of legal service demand, and the costs of outside counsel
abroad, Dana’s general counsel has secured attorney time-share arrangements with local firms abroad.68

The Procurement Strategy Council has collected real estate and facilities cost-savings tactics to
provide visibility into the range of applications cost-savings opportunities available. The two-by-two
matrix below provides guidance on each tactic’s relative difficulty of implementation and
economic impact.
Real Estate/Facilities Cost-Savings Tactics: Savings Versus Complexity Ranking

Sublease Portfolio Analysis p. 39 Real Estate Portfolio Rationalization p. 38
Work Space “Hoteling” Policy p. 39 Real Estate Transaction Extranet p. 40
Standard Office Furniture Catalog p. 41
High
Cost-
Savings
Shared Telecommuter Workstations p. 38 Soft-Copy File Conversion Process p. 39
Telecom Line Utilization Audit p. 38
Customer Satisfaction Surveys p. 40
Low Office Signage Standardization p. 41
Low High
Workspace Consolidation—Reducing real estate costs through rightsizing space for user requirements
Savings
Impact
X
Shared Telecommuter Workstations Implementation
Complexity
Telco Saves $29,000 per Year by Creating Shared Workspaces for Telecommuters
Telco assigns one seat for every five telecommuters to use on the one to two days they “touch down” with their
workgroup in the office. This results in savings of $29,000 per year in real estate expenses for each telecommuter,
and capital investment avoidance associated with building additional space for these individuals.69
Savings
Impact
Implementation
Real Estate Portfolio Rationalization Complexity
Dun & Bradstreet Captures Real Estate Synergies Across Functions and Saves $51 Million Annually
Years of acquisitions and a decentralized business structure burden Dun & Bradstreet with an overabundance
of costly space that places the company at a cost disadvantage relative to its peers. A business unit–driven, siloed
approach to facilities results in many “trophy” properties that are larger than necessary. Preliminary analysis
by a cross-functional team of managers, consultants, and staff shows that the company’s real estate is impeding
communication and slowing response time to customer needs. To remedy the situation, Dun & Bradstreet’s five-
year portfolio rationalization effort focuses on consolidation, renegotiation of leases, disposition of excess space,
and better utilization of space through virtual officing. A high-level commitment to the belief that real estate
should be a productivity enabler, rather than a hindrance, contributes to the effort’s success. Overall, the reduction
in space use results in an estimated annual savings of $51 million and a potential increase in shareholder value of
$600 million.70
ONYX*
Savings
Impact
X
Implementation
Telecom Line Utilization Audit Complexity
Onyx Company Saves $2 Million Annually by Tracking and Canceling Unused Phone Lines
Following significant staff reductions, Onyx realizes it does not have an automated system to track unused phone
lines. The number of unused phone lines increases, and the department managers who are responsible for final
cancellation are slow to give up the lines. In response, the firm implements software to automatically cancel phone
lines of employees and contractors once they leave the firm. Weekly data from the enterprise human resources
system on employee and contractor departures are sent directly to the carrier to trigger appropriate phone line
cancellation. As a result, the firm reduces the number of phone lines by up to 20%, saving $2 million annually.71
* Pseudonym.
Savings
Impact
Implementation
Sublease Portfolio Analysis Complexity
JP Morgan Chase Eliminates 3.5 Million Square Feet Through Portfolio Analysis
JP Morgan Chase analyzes the returns on its subleased space to outside tenants and finds them to be inadequate.
The bank eliminates 3.5 million square feet of excess space and return capital to the business.72
Savings
Impact
Work Space “Hoteling” Policy Implementation
Complexity
Accenture Lowers Occupancy Costs 25% by Eliminating Dedicated Space at Seattle Office
Accenture’s Seattle offices are designed to offer 100% “hoteling,” with no dedicated desk space for employees.
Consultants reserve a desk for time they spend in the office and can access needed business services. The consulting
firm saves 25% in occupancy costs through better space utilization for its mobile workforce.73
Thatcher
Thatcher & Company *
& Company
Savings
Impact
X
Soft-Copy File Conversion Process Implementation
Complexity
Thatcher & Company Avoids Renting 112,000 Extra Square Feet by Converting Files
to Electronic Format
Facing high rental costs for its new headquarters in New York City, Thatcher & Company updates fi le retention
procedures and reduces its space needs by 10%. The financial services firm also takes steps to eliminate file cabinet
space by converting paper-based documents into electronic storage format, further reducing square footage by
12%. In total, these efforts decrease the company’s space requirement by 112,000 square feet, which translates into
an annual savings of more than $3.5 million based on average rental rates in the New York.74
* Pseudonym.
Transaction Efficiency—Automating service requests and tracking and communicating performance to

reduce transaction costs while increasing overall user satisfaction
Savings
Impact
X
Implementation
Customer Satisfaction Surveys Complexity
World Bank Uses Help Desk to Cut Customer Satisfaction Surveying Costs
As part of its larger performance benchmarking effort, the World Bank’s customer facilities help desk solicits
feedback on customer satisfaction from 10% of service order callers. This random sampling effort helps the bank
avert the cost and time investment of a full survey effort. The data are communicated with facilities management
to target areas for improvement and to inform outside contractor performance reports. Customer satisfaction rises
from 74% to an average of 92% over three years.75
DONAU * X
Savings
Impact
Real Estate Transaction Extranet Implementation
Complexity
Donau Collaborates with Jones Lang LaSalle to Develop Low-Cost Extranet for
Real Estate Transactions and Facilities Management
Donau’s real estate group, which manages 330 locations in 48 countries with a staff of six people, strives to use its
limited resources with high efficiency. To standardize processes for transactions and facilities management across
the portfolio, Donau’s real estate group partners with Jones Lang LaSalle to devise the concept of the real estate
extranet system. The Web-based tool collects data on facilities operating costs for the whole portfolio and facilitates
internal benchmarking between sites. The system offers automated service request functionality and online
conference room reservations. Donau’s investment to develop the system is $50,000, and it reduces the company’s
facility management costs by 35%. In addition, Donau’s legal, procurement, and security groups express interest in
using real estate’s extranet to capture cost information from across the company.76
* Pseudonym.
Consumption Management—Reducing variation in user purchases through standardization drives cost

improvements
Highfield, Inc. *
X
Savings
Impact
Standard Office Furniture Catalog
Implementation
Complexity
Standardizing Furniture for 29,000 Workstations Averts $23 Million in Furniture Costs
To lower its total furniture expenses, Highfield, Inc., standardizes its furniture offering for 29,000 workstations
worldwide. By moving to a common standard, Highfield prolongs the useful life of its furniture assets because it
can reuse inventory and obtain components from secondary markets. These measures help Highfield, Inc., avoid
$23 million in new furniture purchases over the next three years.77
Savings
Impact
X
Office Signage Standardization Implementation
Complexity
Aetna Standardizes Signage and Offers Desktop Self-Service for Nameplates

Aetna offered two types of nameplates to its 45,000 employees, one type for workstations and one type for office
workers. Nameplate orders and exterior signs for new buildings were fulfi lled by an in-house signage shop on a one-
off basis. To capture economies of scale and offer quicker delivery of employee nameplates, Aetna institutes a self-
service, standardized signage program. The program enables employees to create their own nameplates through a
system available on their desktop. The self-service nameplate system reduces the cost of internal signage by 50%.
Aetna also consolidates orders on external signs through a national provider, which yields 20% savings.78
* Pseudonym.
Third-Party Logistics
The Procurement Strategy Council has collected third-party logistics cost-savings tactics to provide
impact.
Third-Party Logistics Cost-Savings Tactics: Savings Versus Complexity Ranking

Local Scrap Recycling Network p. 44 Inbound Materials Management Redesign p. 44
Carrier Scorecard Program p. 44
High
Cost-
Savings
Logistics Spend Disaggregation p. 45
Low
Low High
Performance Management—Increasing scrutiny over supplier performance to capture agreed-upon

contractual benefits
Savings
Impact
Carrier Scorecard Program Implementation
Complexity
MeadWestvaco Creates Carrier Scorecard, Drives Millions in Performance Savings

MeadWestvaco’s corporate logistics team deployed a series of benchmarking surveys at the divisional and
corporate levels and shared benchmarking data across the enterprise. This led to the creation of a freight carrier
scorecard based on 20 to 30 critical metrics for spend management. The program generated $50 million in savings
in its first year.79
Reconfiguring Materials Management—Improving the efficiency of moving materials (inbound and

outbound) to reduce overall cost
* X
Savings
Impact
Implementation
Complexity
Local Scrap Recycling Network
Azure Switches to Local Recycling, Saves $100 Million in Freight Costs Annually
Azure’s subcontractor recycles locally the scraps left from aluminum production, instead of shipping them back to
Azure’s manufacturing facilities for processing. Azure saves $100 million in freight costs annually.80
X
Savings
Impact
Implementation
Complexity
Inbound Materials Management Redesign
Kodak’s Cross-Docking Program Reduces Inventory Carrying Costs by $500 Million

Kodak utilized a lean distribution technique by implementing a cross-docking program at its central warehouse.
Kodak took over inbound logistics from its suppliers, changing its delivery schedule from independent deliveries
two to three times per week to more daily, smaller “milk runs” throughout the day. Once at the facility, Kodak
staff sorts the inventory and prepares it for outbound deliveries scheduled to meet demand throughout the
manufacturing complex. This reduced Kodak’s inventory carrying costs by $500 million.81
* Pseudonym.
Spend Disaggregation—Analyzing and breaking down spend for opportunities to pursue alternative,
lower-cost sourcing arrangements
Huffman *
Savings
Impact
X
Logistics Spend Disaggregation Implementation
Complexity
Huffman Saves $1 Million by Outsourcing a Portion of Packing Logistics

Huffman Enterprises, a global retail organization, isolated distribution and inventory control segments of its
packaging and store supplies from the purchasing group. The company was able to bid out this portion of logistics
spend for its global store operations to a third-party logistics provider, saving the company more than $1 million
annually.82
* Pseudonym.
Travel and Entertainment

The Procurement Strategy Council has collected travel and entertainment cost-savings tactics
to provide visibility into the range of applications cost-savings opportunities available. The two-
economic impact.
Travel and Entertainment Cost-Savings Tactics: Savings Versus Complexity Ranking

Lead Prequalification Virtual Meetings p. 49 All-in-One Travel Planning Web Site p. 48
High
Cost-
Savings
New-Hire Application e-Learning p. 48 In-house Instructor Training p. 48
Shared-Space Operating Agreement p. 49
Low
Low High
Virtual Meeting Tools—Deploying Web-based technology to facilitate virtual meeting reduces overall
travel-related expenses
Savings
Impact
X
Implementation
New-Hire Application E-Learning Complexity
Cisco Utilizes E-Learning for Training New Staff, Reduces Travel Costs by $50 Million
By transitioning approximately 95% of the applications group’s new hires to the Field E-Learning Connection
online training program, Cisco saves roughly $50 million annually from reduced training-related travel costs.83
Savings
Impact
X
Implementation
Complexity
In-house Instructor Training
Network Intelligence Deploys Web Conferencing, Reducing Travel Costs by 20%

Sales executives at Network Intelligence seek ways to reduce costs to combat the pressures of a sluggish high-tech
market. The company partners with WebEx, a provider of virtual meeting services, to supplement in-person sales
calls with Web conferencing. The company uses the system both to connect with existing customers as well as to
“prequalify” potential leads, thereby minimizing travel time and expenses. Additionally, WebEx allows salespeople
to demonstrate the software to clients in interactive sessions. Network Intelligence’s travel budget decreases by 20%,
and sales increase 80% in one quarter after the company implements the online conferencing tool. In addition, the
company’s deal-closing ratio increases 20% as a result of online product demonstrations.84
X
Savings
Impact
Implementation
All-in-One Travel Planning Web Site Complexity
Roadway Trains Developers in House, Saves $50,000 in Travel Costs

Roadway hosts instructors for its application development training courses on site instead of sending its developers
to seminar locations, saving $50,000 in training-related travel costs annually.85
Standard Sourcing Guidelines—Communicating a standard travel policy drives cost reductions through
advanced planning and adaptation of online booking
Savings
Impact
Implementation
Lead Pre-Qualification Virtual Meetings Complexity
Verizon’s Travel Policy Saves $11 Million, More Than 30% of the Category Spend
In 2005, the travel sourcing team at Verizon Communications selected a travel management provider and
implemented an online tool for booking flights and hotels. The travel team negotiates deals with airlines, rental car
agencies, hotels, travel agencies, and corporate card suppliers. The negotiated terms with preferred suppliers are
then imported into the new online booking tool. The strategic sourcing group reviews reports from reimbursement
requests, the travel management provider, and the corporate card provider to ensure compliance. Verizon also
shares data with preferred suppliers to validate mutual performance against targets. To drive cost reduction and
employee adoption of online bookings, Verizon instituted a travel policy with the following elements: 1) Fly lowest
logical airfare, 2) Book online whenever possible (adoption rate is now 83%), 3) Prioritize airport convenience over
fare cost, 4) Buy business class only on international flights longer than six hours, 5) Use specific airlines in select
markets, and 6) Noncompliant travelers receive e-mails.86
Leveraging Latent Assets—Offering partnership benefits to suppliers to improve pricing negotiations
*
Savings
Impact
X
Implementation
Complexity
Shared-Space Operating Agreement
Beta Hospitality Swaps Operating Space for Better Pricing, Saves $2 Million
Beta Hospitality strikes an agreement with a major rental car company that provides the rental company operating
space at Beta’s properties in exchange for better prices for Beta’s employee and customer rental agreements. The
deal increases customer traffic and visibility at Royal Blue properties, providing the company an additional
$2 million in annual revenue and savings.87
* Pseudonym.
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2003.
New Service
Better, Faster Results Based on the Experience of 500 Companies

Immediately available resources support savings results and category planning…
Limited-Time-Only Events: Category Intelligence Teleconferences Immediate Takeaways for 2007 Advance Planning
Compendium of Cross-Functional Savings Tactics
Facilities Management—Q4 2006 $
Savings ideas from across the enterprise (usually restricted
Redefining Processes to Reduce Costs and Increase Service to each functional program)
Category Category Management Playbook and Pitch Deck

HR Benefits—Q4 2006 Sourcing A step-by-step category execution toolkit and business
Optimizing Cost and Value in the Vendor Selection Process Tools
case presentation
Travel—Early January 2007 Facilitated On-Site Workshop

Reducing Spend Through “Total Employee Mobility” Strategies Mobilize your team to kick off your 2007 category strategy
…coupled with Council support to guide you through the most challenging categories
Council Category Support Across the Project Life Cycle
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Prioritize Engage Source/ Document

Partial List of Categories Addressed and Plan Stakeholders Negotiate and Report
• IT/Telecom • Legal
• Market Intelligence • Stakeholder • RFx Tools • Performance Metrics
• Facilities Management • 3PL Briefs Engagement Strategies and Definitions
• Packaging • MRO • Contract T&C
• HR Benefits • Energy • Business Case • Role Definition Database • Scorecards and
Calculators and Work Plans Dashboard Templates
• Marketing and Advertising • T&E • Spend and Savings
• Category Strategy Plans • Stakeholder Pitch- Benchmarks • Benefits
A Catalog of Category-Specific Savings Tactics
Decks Communications Plans

55
Source: Procurement Strategy Council research.

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Energy Cost-Savings Tactics p. 5

HR Benefits Cost-Savings Tactics p. 9

MRO Supplies Cost-Savings Tactics p. 29

Outside Legal Counsel Cost-Savings Tactics p. 33

Third-Party Logistics Cost-Savings Tactics p. 43

Travel and Entertainment Cost-Savings Tactics p. 47

How to Use This Guide

1. Category Cost-Savings Checklist

2. Savings Versus Complexity Rankings

Examples of Category Management Tactics: Savings Versus Complexity Trade-Offs

Low-Hanging Fruit CPO Leverage Zone

Ambient Lighting Conversion Upgrades p. 7 Soft Copy File Conversion Process p. 39

Cost-Savings Tactics Checklist

1. Internet-Based Training p. 2 1. Supplier Scorecard p. 10

2. Standardized Consulting Contracting p. 2 2. Self-Care Guide p. 10

3. Managing Consulting Demand p. 2 3. Benefits Spend Disaggregation p. 11

5. Central Contract Labor Staffing Portal p. 3 5. Extended Illness Allowance p. 11

6. Workforce Management System p. 3

1. Low-Cost Fuel Purchasing System p. 6

2. Petrol Cost Awareness Program p. 6

3. Heating Oil–Driven Diesel Hedging p. 6

Ambient Lighting Conversion

5. In-Store Natural Light Utilization System p. 7

6. Web-Based Energy Asset Management System p. 8

7. Retail Energy Tracking p. 8

Computer Monitor Energy

Cost-Savings Tactics Checklist

1. Mixed Offshore Portfolio p. 14 22. VoIP System p. 21

2. Offshore Development Center p. 14 23. Enterprise Instant Messaging System p. 21

3. Flexible IT Project Staffing Model p. 15 24. CFO Laptop Approval Process p. 22

4. Alternative Development Project Planning p. 15 25. Needs-Based Storage Policy p. 22

5. Web-Based Project Management Portal p. 15 26. Used Equipment Purchasing Policy p. 22

6. End User–Driven IT Solutions p. 16 27. Unified IT Sourcing Platform p. 23

7. Application Reuse Repository p. 16 28. Vendor Solvency Scanning Procedures p. 23

8. Equipment Retirement and Reuse Center p. 16

9. Internal Equipment Recycling Process p. 17 V. Marketing and Advertising

10. Prioritized Application Maintenance Process p. 17 Performance-Based Advertising

16. Standardized PC Equipment Upgrade Policy p. 19

17. Standard Hardware Reverse Auctions p. 19

18. Standardized Client Software Build p. 20

19. Server Capacity Utilization Assessment p. 20

20. Standardized Help Desk Service Operations p. 20

21. Enterprise-Wide Single Sign-On System p. 20

Cost-Savings Tactics Checklist

1. Decentralized Hazardous Materials Purchasing p. 30 1. Shared Telecommuter Workstations p. 38

3. Janitorial Staff Assignment Assessment p. 30 3. Telecom Line Utilization Audit p. 38

4. Maintenance Supplier Suggestion Box p. 31 4. Sublease Portfolio Analysis p. 39

5. International Consortium Sourcing p. 31 5. Work Space “Hoteling” Policy p. 39

6. Third-Party Packaging Negotiations p. 31 6. Soft Copy File Conversion Process p. 39

7. Customer Satisfaction Surveys p. 40

VII. Outside Legal Counsel 8. Real Estate Transaction Extranet p. 40

1. Third-Party Outside Counsel Search Service p. 34 9. Standard Office Furniture Catalog p. 41

9. Contracted Legal Risk Triage p. 36

2. In-House Instructor Training p. 48

3. All-in-One Travel Planning Web Site p. 48

4. Lead Prequalification Virtual Meetings p. 49

5. Shared Space Operating Agreement p. 49