Is It Time for a Rebirth of Strategic Sourcing? – part 2

Category IV: “Standalone strategic sourcing.” Companies have tried to introduce and embed strategic sourcing without the supporting pillars of a transformation roadmap – and as a result have had a difficult experience. Leading-edge companies are smart: they introduce strategic sourcing as one element of a comprehensive transformation roadmap. That point is well made in this quote attributed to the ISM: “Without real procurement transformation, only 60% of the value of procurement initiatives are retained by year two. This value drops by 10% for each subsequent year.”

If you are in this category, you are leaving a lot of value on the table, and making success more difficult than it needs to be. For background on the essentials of the transformation process, you can download the article I wrote for Supply Chain Management Review: http://www.greybeardadvisors.com/resources/white_papers/

Category V: “Doing it well, but need to re-energize.” Finally, there are companies that have done all of the things I advocate, and have been sticking to it for an extended period. The original excitement may be diminishing as the sourcing and transformation process has matured, and the enthusiasm associated with early successes gives way to an almost-predictable pace of new results. How do you keep the organization interested? How do you re-energize everyone? Here are a few ideas to consider out of a long list of possibilities:

1. Rotate category sourcing and contract management assignments at least once every three years. (provides opportunities for “fresh looks and new perspectives”)

2. Make a visible commitment to Talent Management, including a minimum 40 hours of training per person per year.

3. Institute an internal certification for demonstrated strategic negotiations expertise (e.g. a Certified Negotiator program).

4. Expand involvement of technical experts and end users as sourcing team members.

5. Develop and implement a “supplier management program” to measure performance.

6. Implement a supplier recognition and reward program.

7. Implement a recognition and reward program for key stakeholder end users who demonstrate cost reduction innovation or contribute ideas to be explored. (Program design would vary based on organizational structure - concept is to create internal competition for recognition and reward).

8. Encouraging ongoing development of market knowledge for high volume spends or critical materials, to be formally updated at least every two years. (Many successful strategic sourcing efforts become less than optimal due to new opportunities for products and services or changing market dynamics; i.e. supply vs. demand, new entrants, supplier consolidation etc.)

9. Annual nomination of a specific number of products or services to be evaluated for potential outsourcing or insourcing based on changes in internal capabilities or external markets.

These are just a handful of the ideas that we have used in our corporate careers, and have worked with clients to implement as part of a transformation plan for their supply management activities.

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