Spend Management's Alternative Medicine — Going Holistic, Are We?

Over on Supply Excellence, Tim Minahan recently opined in a post that it's time for alternative Spend Management medicine, given all of the attention companies are beginning to pay to procurement, not to mention the lack of results deploying traditional approaches in the current market conditions. While some of the recommendations are a bit self-serving (e.g., tackle alternative categories which Ariba happens to have deep expertise in), I think Tim is generally spot on in his suggestions, even those in which his employer would be more than willing to deliver on. His advice includes suggesting that procurement organizations reset expectations "using pricing benchmarks to set realistic expectations for sourcing and auction goals for commodities in markets that are experiencing high volatility and inflation." Tim's other suggestions include managing demand more aggressively internally including identifying and aggregating "purchasing demand for specific goods and services -- such as new hardware -- across business functions or divisions ... [and] standardizing purchasing requirements -- such as defining common configurations for new laptops or standardizing similar parts into a single, standard specification -- to improve negotiation leverage and turnaround with suppliers."

Tim's analogy of alternative medicine is spot on, although he does not go far enough in explaining it. I'll try here. Sometimes alternative medicine involves sticking pins in the patient. It often requires more than just massaging the patient externally and shuns the "pill a day" remedy to a malady. It's invasive, in more ways than companies are used to, considering that it requires treating the whole patient, not just the symptoms. Imagine, for example, taking a paunchy middle manager of a company and telling him that he's going to start running five miles a day while also doing Yoga (and that he's got to cut the six pack habit in half). Not exactly an easy sell, eh? Unfortunately, many of the tactics for managing cost in today's environment are just as invasive. But the question should not be whether an organization is ready for this type of treatment. It should be who should communicate the cure. Ideally, it should come from the top, needles and all.

- Jason Busch

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