Demand Management: A High-Impact
Lever for Cost Reduction

As sourcing professionals face increasingly complex and margin-conscious environments, demand management has emerged as a critical strategy to drive value beyond traditional rate reductions. No longer limited to price negotiation, today’s sourcing leaders must also consider process optimization, consumption reduction, and specification standardization to deliver lasting impact. While demand management should be a shared responsibility with internal stakeholders, sourcing professionals must proactively help identify and validate these opportunities to ensure they are actionable and aligned with business goals. This broader responsibility requires cross-functional collaboration and an understanding of operational levers to unlock sustainable cost savings while enabling stakeholder success. 

The Case for Demand Management

Demand management is one of the most powerful yet underutilized strategies for reducing total cost.
Rather than relying solely on rate reductions, demand management focuses on decreasing consumption,
standardizing specifications, and governing usage. When executed well, these efforts can reduce up
to 100% of the cost associated with a given good or service.

Critical to this approach is the sourcing professional’s ability to lead cross-functional teams,
drive stakeholder engagement, and work collaboratively with vendors to identify root causes of waste.
Even when a competitive bid yields minimal rate savings, it creates a valuable opportunity to align
with stakeholders and actively engage suppliers in exploring demand management strategies.
Sourcing professionals should routinely challenge vendors, either through the RFP process or direct
discussions, to propose specific utilization reductions or process improvements that can eliminate
unnecessary cost and improve operational efficiency.

Core Demand Management Levers

1. Reduce or Eliminate Consumption

The most impactful lever, this involves removing products or services that no longer add value.
Key questions include: Would the customer notice if this were gone? Would they pay more to keep it?
These insights usually emerge through collaborative efforts with cross-functional teams.

2. Standardize Specifications

Refining product or service specifications to the minimum effective requirement can drive significant savings.
This also simplifies supply chains, reduces adjacent labor costs, and improves scalability.
Vendor expertise can be leveraged to identify safe optimization opportunities.

3. Forecast and Govern Usage

Forecasting enables vendors to plan efficiently and pass savings along.
Governance ensures teams adhere to budgets and prevents unauthorized spend.
This is best supported by ERP or P2P systems but can also be managed through manual reconciliation when needed.

Real-World Demand Management Outcomes

Successful demand management requires strong stakeholder engagement to align on service expectations,
prioritize needs, and eliminate unnecessary consumption. Leadership support is critical to drive
innovation and enforce policy adherence, drive accountability, and unlock the organizational change
needed to sustainably reduce costs. The following examples showcase how LogicSource was able to
leverage these partnerships and take a strategic look into demand, using industry benchmarks and
an open mind to optimize processes and reduce costs.

• • •
    Print Marketing Materials: Total cost print marketing costs were reduced by over 50% by eliminating printed marketing materials that were not influencing customer purchase decisions, allowing reinvestment into higher-impact digital marketing channels. By conducting a revenue analysis tied to specific marketing campaigns, we uncovered that certain brochures and flyers had no measurable effect on sales, signaling an opportunity to eliminate them.
  • •
    Cloud-Based Computing: Cloud computing costs were reduced by more than 10% by eliminating non-value-added usage, such as idle test environments and over-provisioned storage. A further 10% reduction was achieved by forecasting expected usage and securing reservation-based discounts. Waste was identified by reviewing monthly cloud utilization reports and identifying underutilized virtual machines and redundant storage volumes.
  • •
    Electricity Consumption: Electricity usage was reduced by over 4% without impacting employee or customer experience by standardizing a temperature set point aligned with HVAC equipment design specifications. An audit of energy usage across locations revealed that inconsistent thermostat settings were driving unnecessary consumption, especially during off-hours. .
  • •
    Bag Specifications: A ~10% cost reduction was achieved by optimizing the material composition of retail bags to maintain strength while reducing material thickness and weight. Testing and usage data showed that the prior bag specification exceeded durability needs, and supplier feedback supported a more cost-effective alternative that met performance requirements.
  • •
    Yard Carrier Operations: $500K in rate reductions and $3M in driver utilization improvements were achieved by optimizing yard carrier operations, ultimately reducing the overall number of required drivers. This opportunity was uncovered by analyzing trailer and driver idle time, which revealed inefficient scheduling and underutilized labor across shifts.
  • •
    Campus Security Services: The client was managing campus security in-house, employing roughly 133 guards and supervisors. Through a competitive RFP process to outsource the service, all vendor proposals indicated an optimal staffing model of 95 to 102 personnel. We are now finalizing vendor selection and implementation, with a projected $2.2M (28%) cost reduction. Waste was identified by benchmarking guard-to-campus ratios at peer institutions and evaluating shift overlap and supervisory layers, which showed clear overstaffing relative to actual security requirements.

Conclusion

Demand management is no longer optional for modern sourcing leaders, it’s essential. By thinking beyond price and working closely with stakeholders and suppliers, sourcing professionals can uncover new levers of value and deliver meaningful business impact. Start by assessing where consumption can be reduced, specifications simplified, and usage governed, and make demand management a cornerstone of your cost optimization strategy. Challenge your suppliers to be creative and innovative. Partner with companies like LogicSource, where we bring forward proven successes from other leading organizations to help spark demand management ideas that deliver measurable results.

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