Middle Market Musings: Practice Trumps Theory

I had the chance yesterday to meet with CEO of a middle market manufacturer in Chicago. The meeting reminded me about everything that is good about the middle market. The focus on execution; the scrappiness; the sense of ownership; the penny pinching -- they all combine in good middle market companies to make Spend Management a top priority, even when the management team is not familiar with such terms as "Six Sigma" or "strategic sourcing" (or even the phrase "Spend Management," for that matter). For me, the middle market's focus on execution rather than jargon is so refreshing. But focus and attitude are only part of the elements that make these organizations so receptive to the concept of Spend Management. Knowledge concentration and interest at the top is another. Every time I speak with a middle market CEO, he can almost always roll-off his top 5-6 suppliers. And he can probably tell you about their performance, flexibility and pricing history as well. Try getting this level of detail from the CEO of a Fortune 1000 organization!

At first, a middle market CEO will probably tell you that his firm is sourcing at a world-class level. And given his involvement in vendor negotiations, there's a good chance (on a headcount basis) that they are world-class given the incredibly limited resources of the procurement team, and the CEO's direct focus on cost reduction and cost containment. But once you begin to introduce how areas such as low cost country sourcing, reverse auctions, target costing, and optimization could have on their top spend categories, their ears perk up, and they will often admit that there are opportunities they've been leaving on the table. I've found that middle market CEOs are hungry for knowledge, and even more ravenous at the prospects of saving money, given that a dollar saved in purchasing typically means a dollar more in their kid's college fund. And there's nothing theoretical about that!

Jason Busch

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