July 15, 2013
Imagine a scenario in which an organization has made an investment in an enterprise-level Strategic Sourcing software package of some kind, and it is not getting very much of a return on its investment. The software may be standalone or perhaps it is part of an integrated spend management suite of applications. Regardless of how it has come to be within the organization, there it sits, so full of promise, yet languishing in obscurity. As counter intuitive as this scenario may seem, this situation exists within more large, successful companies than you might guess.
So, why does this happen? Why is such a powerful tool sitting on the shelf gathering dust or only pressed into service to accomplish tasks that utilize but a fraction of its capabilities? Why is it so underutilized, if it is even utilized at all?
The answer often lies within the Strategic Sourcing business processes of the organization itself. Likely, one or more of the following are true. Organization processes are:
b) Not standardized within or across spend categories
c) Overly simple/manual
In other words, the capabilities of the software greatly exceed the Strategic Sourcing processes currently in place within the organization. The tool can do exponentially more than its master requires of it. Is this a problem or an opportunity? Perhaps it is both.
It is possible to look at this situation in terms of the old adage, “If it’s not broken, don’t fix it.” However, applying that conventional wisdom depends on how one defines the term “broken” within this context. Consider the following issues that can often be found within organizations where there is a substantial gap between Strategic Sourcing business processes and functionality available within the Strategic Sourcing software:
Underutilization of the software results in spend leakage
Difficulty identifying all “sourceable” categories
Inability to maximize the percentage of spend under management
Increased vulnerability within the supply chain
While these issues may not be indicative of processes that are necessarily broken, they are rarely present in organizations that have an integrated, automated Strategic Sourcing program in place. Therefore, there is a real opportunity to begin down the path towards Strategic Sourcing process optimization by increasing the utilization of the software tools that are already in place. The next question is: How to get started?
As is the case so often in business, and life, it is usually a good idea to start small. Enterprise-level Strategic Sourcing software packages typically contain a wealth of available functionality and much of it can be implemented without a large project team, expensive consultants or substantial budget. All it takes to get started is a little bit of research, some configuration, and the moxie to make it happen. Do not be intimidated by all of the options available. Focus instead on a category that is not currently being sourced, something small enough to be manageable, but important enough that it has some visibility within the organization. The goal here is to get a quick win and gain some momentum. The idea is to take that category and, utilizing the out-of-the-box functionality available in the software toolset, execute a sourcing event that in some way adds value to the business.
Once you have that first event under your belt, you can use what you have learned to repeat the process for another category. After a few more small successes, chances are good that people within the organization are going to take notice. Now that you have people’s attention, the thought leadership and innovation that you have demonstrated just may provide you the foothold required to set your organization on a path towards the implementation of a true Strategic Sourcing Program. The alignment of sourcing strategy, policies and procedures can be combined with the consistent, enforceable application of those procedures to minimize spend leakage and maximize the effect of upstream procurement on the bottom line.
Such an undertaking will likely require additional resources and assistance from someone with deep knowledge of the software package being utilized. Do not worry about that for now. “The journey of a thousand miles begins with a single step.” (Lao Tzu). Take that step and imagine where you could end up.
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Manager, Procurement Optimization The Shelby Group