Managing Indirect Spend:
Enhancing Profitability through Strategic
The book Managing Indirect Spend: Enhancing Profitability through Strategic Sourcing is scheduled for release on October 19, 2011, by publisher John Wiley & Sons. It is currently available for pre-order at Amazon.com.
Part Two: The Tools
Part Three: Examples from the Field
Part Four: How to Do It
About the Authors
About the Contributors
Collaboration is Key to Effective Strategic Sourcing
One stage of the strategic sourcing process that is often overlooked is the project kickoff. Regardless of your role within the organization, it is important to make sure that you are not operating in an isolated bubble. Others should develop an understanding of the goals and objectives of your initiative, from the executive team to end users and many in between…. In many cases, the greatest impediment turns out to be implementing change within the organization. All too often, purchasing or finance teams uncover an opportunity to reduce costs substantially and, naturally, believe that letting the facts speak for themselves is all it takes to make the necessary changes. Change, however, does not come easily, and even with the best business case you will find that having the support of the executive team or other higher-ups within the organization pays off.…
End users and other interested parties should be made aware of the initiative as well…. [E]nd users have a stake in the project, as they are dealing with the day-to-day realities of working with the supply base. Try to form a cross-functional team that includes members of several different departments: finance, purchasing, operations, and other affected parties. Having a cross-functional team allows you to get the perspective of a diverse group within the organization and aids in consensus building as projects move through the sourcing process.
Many companies still do not apply strategic sourcing techniques to indirect spend categories. Instead, indirect spend is treated as a series of one-off purchases, or is sourced with a simple three-bid strategy with no efforts beyond reviewing the supplier price responses. Typically, with indirect spend, per-item prices are relatively low, the product or service is not crucial to the business, and the overall costs are rarely examined because of the difficulty entailed in gathering meaningful spend and market data. Strategic sourcing allows companies to shift away from thinking about indirect spend in this ad hoc manner, and provides spend visibility, objective decision making, and a project management tool to ensure efficient use of the sourcing team's time and efforts.