Today’s post is from Robert A. Rudzki, President of Greybeard Advisors LLC, who has (co-) authored a number of acclaimed business books, including Beat the Odds: Avoid Corporate Death and Build a Resilient Enterprise, On-Demand Supply Management, and the supply management best seller Straight to the Bottom Line.
There has been increasing debate in the blogosphere about the alleged death of strategic sourcing. Today, I’d like to propose several more fundamental, and on a company-specific basis, more revealing questions:
a) Do your senior executives understand the enormous potential of modern supply management (only one element of which is strategic sourcing)?
b) Do your senior executives understand how to achieve that enormous potential — i.e., how to build the transformation roadmap and how to support it?
c) If the answer to the first two questions is “no,” are you prepared to take a leadership role in helping your senior executives achieve the necessary awareness? If not, then debating the “strategic sourcing is dead” question is moot at the company level.
I’ve also described essentials of Procurement and Supply Management Transformation.
Consistent with my past blogs, leading edge companies introduce strategic sourcing as one element of a comprehensive transformation roadmap. They recognize that trying to introduce and embed strategic sourcing without the supporting pillars of a transformation roadmap is likely to generate only short-lived benefits.
These leading companies are the ones most likely to be using true strategic sourcing (and other best practices) over an extended timeframe — not as a fad — yielding substantial and sustainable value. Done as it should be, and led properly, true strategic sourcing generates lasting benefits that go well beyond price or cost.
And, the importance of approaching this subject as more than just a narrow focus on implementing strategic sourcing is captured in this quote from the Institute for Supply Management: “Without real procurement transformation, only 60% of the value of procurement initiatives are retained by year two. This value drops by 10% for each subsequent year.”
So, it’s time to put the birth or death of strategic sourcing in its proper context: the leadership, or lack thereof, at each company. Here are some observations from my combined experiences as a CPO-practitioner, advisor and speaker:
- Believe it or not, 25 years after the birth of strategic sourcing, many companies of all sizes still are not aware of “true” strategic sourcing.
- Equally astonishing, a surprising number of companies believe they are using strategic sourcing, but in fact are not.
- Perhaps as a reaction to the need for “quick wins” in the current business environment, some companies who previously used a true strategic sourcing process have since “dumbed down” their process into a tactical ghost of what it used to be.
- As noted above, trying to introduce and embed strategic sourcing without the supporting pillars of a transformation roadmap is likely to generate only short-lived benefits.