Taming the Procurement Tornado
Speeding Complex Categories to Market with Fewer Hands on Deck
As companies focus on core competencies, resources are shifted away from internal service organizations, in particular procurement departments. Ideally, the theory is that lean strategic sourcing teams select suppliers and negotiate rate cards, which IT builds into online catalogs where business stakeholders can make purchases directly.
However, we have found that this optimization approach for complex indirect categories such as marketing, packaging, retail operations, store development, information technology and more, simply does not work.
Requests for complex categories stir up a tornado of components to conquer and calibrate – detailed specifications, quotes from qualified suppliers and collaboration with the selected providers prior to execution. All of which means that domain experts have to constantly battle the elements: source suppliers, communicate requirements and ensure timely production and delivery.
Additionally, at an operational level, there’s a general sense of frustration when the new procurement technology storm hits: “This is going to make my life harder, not easier,” is the complaint most often heard when potential end users see the resultant interfaces and workflows.
Despite dwindling resources and the challenges of using automation for complex categories, internal demands for indirect procurement are as high as ever. What can decision makers do to tame the tornado?
Map the Ocean
Focusing on core competencies is a smart thing to do. Sourcing and procurement for direct spend tends to be closest to the core. Occasionally, technically indirect categories, such as primary packaging, can be considered core for various reasons. Having a clear vision as to where each category falls eases the transition.
Automate the Easy Stuff
Once your environment is mapped, execute the obvious: make simple categories self-service as quickly as possible: office supplies, certain types of MRO (maintenance, repair and operations) and the like do not require intermediaries.
Explore Emerging Cloud-based Automation Solutions
Keeping costs down as you digitize is easier than ever. Even in the enterprise software category, there are numerous cloud-based solutions, such as Coupa and our own OneMarket®, that eliminate the capital expenditures required for traditional enterprise technology investments.
The right automation solution can help a lean team of strategic sourcing professionals to oversee the full relationship cycle common with complex categories, from sharing complex specifications, receiving quotes, placing the business and managing the logistics of distribution. (Our platform in particular even offers intuitive project management tools that enable greater collaboration with upstream internal partners, e.g., customers in marketing, merchandising and creative services.)
Guard Subject Matter Expertise for Complex Categories
As you focus on what you have to control, the need for generalists decreases. Finding ways to retain people with deep expertise in complex categories closest to your brand and business will prove invaluable.
For both simple and complex categories, identifying the right partner can be a viable solution. Firms with the right domain expertise, automation and cultural alignment can improve your bottom line; transferring resources to your new partner can protect important knowledge and even improve service. In fact, experienced executives who have completed successful outsourcing-driven transformations often comment that outsourcing has given them their greatest transparency and highest historical service levels.
We believe that a thoughtful journey through these steps can enable your organization to identify the best combination of people, process and technology that will ultimately yield a solution for taming your tornado of internal demands, even as the number of available resources may be dwindling. The most important thing to weather the storm is to start charting your course as soon as possible.
Want to learn more? Let’s start the conversation today.
LogicSource was purpose-built to drive profit improvement for their clients through better buying. LogicSource focuses exclusively on the sourcing and procurement of goods not-for-resale, which typically represents 20% of a company’s revenue and the greatest area of spending inefficiency. Tested time and again in the marketplace, their proven engagement model builds profitable partnerships that achieve 4-15x ROI. Learn more about the LogicSource difference at www.logicsource.com.
Refreshed 10/2018. Originally published 1/2017.
Tags: Complex Categories, Automation