With apologizes to my former Pittsburgh based colleagues who speak a rather unique form of the English language, I thought it would be prudent to call everyone's attention to a recent Hackett Study and Purchasing write-up that procurement organizations are leaving a tremendous amount on the table by not tackling project-based spending (extra credit to the first reader who translates the title of this post). To capture some of the essential elements from the write-up, Hackett suggests that "Project-based spending makes up 35% of a company's spending yet is often not well supported by sourcing resources or processes of purchasing departments. In fact, dedicated sourcing professionals with specialized expertise manage the spending only about 17% of the time... [A] typical global 1000 company can drive up to $74 million in annual procurement cost reductions by improving their control of project-based indirect spending."
But what are the best ways of getting at project-based spend? I'll suggest three examples from personal experience. First, if project-based spending categories fall outside of a core area of internal category knowledge, bring in the consultants. In fact, this is a great place to leverage either large-firm or boutique experts to achieve savings. Second, focus on helping procurement serve as a bridge connecting all of the different stakeholders in the project -- internal design engineers, third-party architectural/engineering/project management firms, primes, etc. And third, offer to aggregate and take control of raw material and commodity spend on behalf of both internal and outside stakeholders with various management roles in the project. Even if you can't influence every cost decision, you can still focus on the 80/20 rule by going after the largest raw material, labor and related categories. n Nat. Yinz got it?