Bringing Strategic Sourcing to the Middle Market

Last week, Taras and Lisa ducked out of the office to shoot a video segment with FullStep's Olivier Maurandy exploring strategic sourcing in the middle market. In this segment, Maurandy explores how middle-market manufacturers and other companies can focus their sourcing processes.

The middle market is a different procurement animal than the Global 2000. For one, procurement is often severely resource constrained. And in many middle market organizations -- especially in manufacturing -- procurement professionals must where multiple hats, as buyers, category leads and materials managers. Moreover, many middle market firms lack access to the type of solutions and market/category intelligence that's necessary to drive savings, cost avoidance and risk reduction at the level of larger firms.

As we've suggested before, middle market companies often pursue divergent purchasing objectives from larger companies (e.g., it's not uncommon to see a middle market company give away too much on a negotiation for better payment terms to maximize cash flow). As one example, we've seen first-hand how a middle market organization was excited about how it was able to negotiate 180 day payment terms for their fasteners spend. But clearly, in getting these terms, they gave up significant leverage in driving down their purchase cost for a category where it's not uncommon to see 30-50% savings via competitive bid.

In addition, middle market companies often don't have the same buying clout as larger organizations, nor do they have consistency of volume. This can make it harder to not only negotiate the best terms with suppliers, but to develop an ongoing collaborative relationship as a preferred buying organization. The regional focus of many middle market organizations can also make it difficult to break out of a regional purchasing mindset.

We encourage you to watch Olivier's thoughts on the middle market. And look for Spend Matters to continue to explore this topic in the future.

- Jason Busch

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