More on our new research paper – Indirect Category Sourcing Savings : Fact or Fiction?

We told you the other day about our new research paper available for download (free on registration) here. It is titled:

Indirect Category Sourcing Savings : Fact or Fiction? Delivering Credible Benefits from Sourcing and Category Management Programmes

I’ve co-authored it with Ed Cross, Managing Director of Xchanging Procurement Services, and in it, we look at how procurement and sourcing programmes benefit from a strong focus on what we call programme and delivery management. That in itself has a number of components, and we’ve identified three key areas. One also addresses the issue we discussed last time, that of the credibility of procurement savings, which is a major problem for many organisations.

Here is an excerpt from the paper....

Improving Programme and Delivery Management

Let us return to the issue of improving programme and delivery management. We have segmented that topic into three key strands, and one of them in particular directly addresses this issue of savings capture and credibility.

  1. Programme management

To deliver effective sourcing and category management, what we might term the “basics” of project and programme management need to be in place. That includes elements such as:

       planning of activities, with proper consideration of dependencies;

       realistic estimating of the time required for activities;

       agreeing deliverables and timing of deliverables; and

       sizing, identifying and allocating resources.

Any major procurement programme or exercise needs to be approached with a project and programme management mindset if it is to succeed.

  1.  Benefits realisation

This is the key to addressing the savings paradox. We need to measure the benefits from our actions, prove that savings are real, and be able track the effect through into the financial results of the organisation. We need a methodology and a process that will stand up to audit if necessary.

That methodology typically will need several components. It starts with effective baselining. Knowing what is being spent and detailed price information, before the programme starts, is vital for accurate measurement.  Tracking the initiatives undertaken and the results in terms of benefits is obviously the next stage. Then we need to be able to see that those benefits are implemented and flow through into real savings.

  1. Programme governance

Our final strand is what we’ve termed programme governance. Some of this is not too different from the process we’d expect to see in any well run programme. The issue with procurement programmes however can be the number of stakeholders, and the central importance of their role. If we’re approaching a complex category, it may be necessary to get the buy-in from a whole range of users, specifiers and budget holders.  So a structured process to gain their approval for what we’re doing, and maintain that as we move through the sourcing process with further “gateways” and check-points, will greatly increase the chance of ultimate success.

So, download the whole paper here, and we will return to it shortly to look at how Xchanging specifically are helping their clients to address these issue.

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