Strategic Sourcing Strategy Help from Source One
In this continuing series, Jennifer Ulrich shares her experiences in the trenches of executing
strategic sourcing projects, to give you practical insights into best practices.
It’s a new year and time for organizations to set realistic, attainable goals for themselves. While we are certainly not out of the woods yet, experts are predicting that some of our economic woes will begin to lift in 2012 as consumer spending rises and unemployment rates continue to fall. That being stated, companies should focus more than ever on how to streamline their costs. If you plan to start a sourcing strategy for the upcoming year you may feel a bit overwhelmed. Where do you begin? How much spend is too much or too little to kick off a sourcing strategy with? Who should be involved? What kind of timeline should we anticipate? These are all valid questions to consider. The following article will address these and other concerns about initiating a successful sourcing strategy from a high level.
Let’s start at the most obvious place, the beginning. Start by setting a goal, sort of like a New Year’s resolution, but one you actually plan to keep. This goal might include a set amount that you plan to save with the entire sourcing initiative or, on a smaller scale, a specific project. You may also want to set a goal that encompasses organizational objectives such as consolidating external resources in order to maximize internal resource capabilities through purchasing standardization. Next, think about the areas that your organization spends a lot on, but does not really dedicate the proper time to; indirect spend categories often make the most sense to lead with. While you can start big as far as spend dollar amount you do not need to “go big” on the category. For example, office supplies is an area that almost every company budgets for and cam be a prime target for improvement. The products and services are tactical, in other words using one brand or another of ballpoint pens will not be detrimental to the backbone of the organization. Your decision on what, and how much, spend to address initially will depend on the method that you use for this sourcing, whether you choose internal resources, a GPO, or hire a sourcing professional to spearhead the project.
Once you have selected the spend category(ies) that you would like to start with, you can decide who should be involved. The people within the organization that are most pivotal are those involved in key decision making in those particular spend categories. This might include the purchasing agents, management, and individuals with a direct connection such as engineers or facility managers. Setting timelines will be dependent on how much time and resources you are able to dedicate to the initiative. Hiring an external sourcing team might be in your best interest if you plan to take on a larger program since they can effectively dedicate expertise and resources for your company’s goals. If you plan to manage the sourcing internally be sure to set a clear timeline for the project(s) and devote an individual to manages the timeline and tasks associated.
Taking on any size sourcing initiative will require time and resource commitments, but if it is carried out with efficiency and adequacy your organization will certainly reap the benefits financially and operationally.
Of course, you can also get our book to help you get started building a sourcing strategy!