Always Have an Exit Strategy

I had the pleasure of being the lead-off speaker right after breakfast at last week’s Procurement Leaders Forum in Boston. The Forum was well attended by leaders in the profession, and had good speakers and good topics. The location – the State Room – offered a magnificent panoramic view of Boston.

One of the other speakers spoke very openly about his company’s strategy to essentially outsource most of their “indirect spend” to a third party. He mentioned many of the classic “reasons” that you hear from companies who go down that path:

(1) we only have time to spend on “strategic” categories of spend
(2) we don’t currently have expertise in most “indirect” categories
(3) we lacked the systems support for indirect spend
(4) etc.

In my experience as a CPO, taking a leadership role in applying modern procurement practices to indirect spend categories is one way that a procurement department can gain the internal respect and admiration that it seeks. (It can also be a source of spectacular savings.) On the other hand, giving indirect spend away to a third party just confirms what your internal detractors have always suspected.

Nevertheless, in spite of some smart alternatives that exist, some companies go down the path of outsourcing indirect spend management.

A practical concern was on the mind of one audience member who asked the speaker “what is your plan to take back” the indirect spend. The speaker acknowledged he was approaching the end of the initial 3-year term, and the go forward strategy had not yet been finalized.

This highlights an important success factor. Be sure to build yourself an exit strategy. Don’t get locked into a provider and its technology in such a manner that the “exit costs” make it difficult to change directions when the time comes to do so.

SC
MR