The 12 Days of X-emplification: Day 9 – Strategic Sourcing Services

Tactical procurement doesn’t cut it anymore. It doesn’t even come close. You need to source strategically, and if you’re not sure how to do that, you need to get help. There’s nothing wrong with asking for help from someone better than you (as long as you make the effort to learn from them so that you will eventually become reasonably self sufficient), but you better make sure they are better and more experienced in the categories you’re handing over before you sign the contract. After all, just because a firm has been in the strategic sourcing business for ten years, it doesn’t mean they’ve ever sourced the categories you’re looking for (especially if they specialized in automotive categories and you’re in retail), nor does it mean that the people who will be assigned to your project are those with the most experience in the categories you need the most help with. Thus, it’s doubly important to ask the right questions, and get the right commitments, before selecting a services provider to help you with your strategic sourcing projects.

1. What experience do the consultants who will be performing the work have?

Every decent size consulting firm (including boutiques) has their standard pitch deck which will read something like “hundreds (or thousands) of years of strategic sourcing support … ten (or twenty) plus years per sourcing consultant … average 10 – 15% savings across all categories … average 20 – 35% savings in these categories relevant to your vertical … etc.”. What’s important is how much experience the consultants who will be performing the work have in general, how much they have in the categories they will be sourcing, and what results they expect to get. Be sure to get resumes of the consultants who will actually be performing the work, and to reserve the right to reject changes in the roster if they are not available at the project start date. Otherwise, you might find that you’re baited with the grey-beard but on the day the project starts you end up with a clean-shaven MBA straight out of school. He might be the smartest MBA you’ll ever meet, but unless the grey-beard is also on the project imparting his wisdom, whether or not he succeeds may ultimately depend on his luck. (Given what some of these firms charge per day, you don’t want your success to come down to luck!)

2. What implemented savings have they achieved? Which customers can you call to back this up?

A negotiated savings of 25% is just that – a negotiated savings. How much of the projected savings was the customer actually able to implement? If the customer was only able to implement 10%, then it’s really only a 10% savings. The firm you want is the one that tracks implemented savings and isn’t afraid to give you some customer references you can call to verify the numbers they give you.

3. How does their approach differ from everyone else’s? Does their answer set off the bullshit detector?

There’s a number of good answers here. The point of this question is to establish their credibility. The fact of the matter may be that their approach is the same approach used by the big guys, like AT Kearney or EDS, or the boutiques, like Denali and Archstone, and that’s ok. Most of the strategic sourcing approaches out there are similar, and, more-or-less, equally correct. What it usually boils down to when selecting between these firms is their experience, their ability to execute, and their willingness to work with you. Thus, it’s okay if they use the same approach, as long as they are willing to be up-front about it (and be able to explain why they think it is the right approach).

To be honest, you probably don’t want an answer that’s completely different from the answer everyone else is giving you. The standard approaches have been working quite well for a while now, and though I believe that constant innovation is critical to continued to success, when it comes to services, sometimes the best route is incremental improvement. After all, most organizations are resistant to change and if the approach is too radical, it could scare off some suppliers – and since you never know who the right suppliers are for you until you go through the process, this usually isn’t a good thing.

4. Do they use their own platform, a third party platform, or your platform? If they plan to use your platform, how do plan to do better than you did? If they plan to use a different platform, why is it more appropriate?

Each of these answers is acceptable, as long as the platform supports the appropriate processes, they understand how to maximize the effectiveness of the platform, and how to get you the data you need when the project is over as well as how to import the data they need. If they use your platform, then you don’t have to worry about getting the data export from someone else’s platform into yours. If they use their platform or a third party platform, then you need to make sure they have a plan for exporting the data in a format that you can archive it for future reference (and comparison purposes when you resource the category when the contract expires). If they use a third party platform, be sure to place extra emphasis on their responsibility to insure that your confidential information is protected.

5. How flexible is the organization in providing sourcing support?

When it comes to sourcing, especially where complex categories are required, it’s not always possible to keep to the fixed schedule you outlined before the project started. Sometimes you need to escalate the project priority and start it early, and sometimes you need to delay the project. During the project, you might have to shorten or extend phases due to unexpected occurrences in the external environment such as natural disasters, demand spikes, or supply shortages. The service provider should have the flexibility to accommodate sudden and unexpected changes during the project as well as the flexibility to take on additional projects as the need arises.