New research paper – Indirect Category Sourcing Savings : Fact or Fiction?

We’ve got a new research paper available for download this week. 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, (pictured here),  Executive Director of Xchanging Procurement Services, also a serious triathlete and heavy metal music fan. (I’d love to say we developed the material during our regular 20-mile training runs... but I’d be lying).

We start by looking at what makes sourcing and category management programmes successful. As well as technical skills, procurement has come to understand that people skills are also vital.

“That is because sourcing and category managers still have to persuade the business – budget holders, senior executives and users of the goods and services – to play their part in the process. Otherwise, how can procurement be sure that requirements and specifications are accurate and appropriate? How can you possibly select suppliers without involving the people who will have to actually work with them, day to day?  And if you do not obtain that buy-in, then too often procurement ends up with contracts in place, but very low internal compliance to those deals”.

But we then suggest that there is a third and less often considered critical success factor – what we have called “Programme and Delivery Management”.

But we believe that this third foundation of an effective process needs more definition, focus and, critically, better tools to help the practitioner. Having the skills and processes in place to meet the needs in all three areas is vital in order to deliver really successful and sustainable category management or sourcing programmes. 

This then leads us on into one of the main challenges for procurement functions – a lack of credibility around the savings numbers that most CPOs are required to produce every year (or more often). Indeed, there is a real paradox here. How come most procurement functions claim savings that represent many times the annual cost of the function – yet fail to get more resource, or even see their own headcount and budgets cut? Might that be because the business (the CFO, the CEO) simply don’t believe or trust the savings figures paraded proudly by procurement?

More in part 2, when we’ll look at how a focus on programme and delivery management can improve performance and address this specific savings issues.

But in the meantime, you can download the Paper here – free on registration.

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Voices (2)

  1. Kim Godwin:

    If there’s an unhealthy reliance upon savings then sadly category managers are going to be fixated on claiming anything that’s going – after all that’s what they’re being rewarded on. And those reward systems plus the traditional procurement mindset of “doing the deal” mean that there’s often little interest in post contract work. So two things:

    1) Calculate benefits on actual consumption and pricing – all too often benefit calculations are based on forecasts at the time of signing the contract, so either calculate them retrospectively or have some ‘true-up’ type of mechanism. I’ve seen this work to great effect in a major transformation programme

    2) Remember that doing the deal and signing the contract only creates potential value. It’s only by taking the goods and services that the value is delivered – or not!

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