Archstone's Quiet Rise in the Operations and Sourcing Services Ranks

Increasingly, when I talk to Fortune 500 procurement and supply chain executives, I'm finding that many are willing to pay for specialized expertise. But they don't want generalists or newly minted MBAs patrolling their supply base, charging inflated day rates based on their academic or past-advisory pedigrees. Indeed, smart Fortune 500 buyers of operations and sourcing management consulting are looking for experts -- not just talking heads and quant geeks with good PowerPoint skills. And in this search, they're starting to look beyond just the big name strategy and operations firms like AT Kearney and McKinsey that continue to get $3000+ bucks per day on a blended rate basis to come in and do sourcing or supply chain strategy work (incidentally, I hear the big name practices are still doing well, which speaks to the overall market demand for supply chain and sourcing services at the moment -- certainly not the value of their fees relative to the competition).

One firm that appears to be benefiting as companies look for focused advisory services is Archstone Consulting. Last week, I had the chance to connect with Bob Derocher, the Operations Practice Lead for the firm. We talked a bit about Archstone's short history -- they were backed by Lake Capital a couple of years back with a large initial investment, just like Huron Consulting -- and its specific practice areas. Top on my list of areas to explore was the growth of Archstone's sourcing and operations group. To date, Archstone has worked with well over a dozen Fortune 500 companies on the sourcing front, including a number of procurement organizations that I would consider highly innovative such as MeadWestvaco (perhaps they advised them on how to corner the activated carbon market, creating a worldwide monopoly that somehow has passed antitrust scrutiny so far -- just kidding), Amgen, CVS/Pharmacy, Agilent, and Northrop Grumman.

With big name sourcing and supply chain clients like this, it's almost surprising that Bob thought that their initial play would be in the higher end of the middle market. In fact, while Archstone does have some strong client names in this segment of broader North American market, their ability to penetrate and serve some of bigger name market leaders has been, perhaps, the driving force of the practice's growth. But what is also impressive from my perspective is not just client names and references. It's the thought leadership that the firm has been able to generate in their activities -- which has contributed to helping them build a strong brand and reputation quite quickly. I feel particularly qualified to comment on this last point, given that I've personally helped set up and create private label thought leadership programs for some of their competitors over the years.

Archstone's sourcing and ops practice areas are noteworthy from the standpoint that they have a good understanding of enabling technology -- which I've verified through numerous informal discussions with some of their clients in the past 12 months -- and the business process side of sourcing and operations. In this latter area, they have expertise in such specifics as organizational design and departmental operations as well as outsourcing strategy and execution. And of course they have a significant category sourcing practice as well, just like everyone else.

Without question, Archstone is a services provider to watch in the sourcing and operations world. Positioned nicely in between the traditional strategy firms and the operational practices of the Big 5, they've been able to carve out a good niche for themselves. Let's see where they can take it from here.

Jason Busch

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