In our last post, we noted that the findings of a recent Source One Management Services survey (summarized in Part I of a 4-part series on how Companies Face Limited Procurement Resources that is available on their website) indicate that 1 of 3 procurement departments is understaffed. Ouch!

We further noted that this had three definite repercussions.

1. You’re not doing enough analysis.
2. You’re not sourcing enough categories.
3. You’re not finding new sources of value.

So what can you do?

At a high level, you can either do something or you can do nothing. Assuming you choose to do something, you can do it internally, or you can do it externally. If you do it internally, you can add staff or augment staff. If you do it externally, you can augment staff or outsource. If you can outsource, you can outsource projects or outsource categories / commodities to a GPO. In other words, your options are:

• Do nothing.
• Hire more staff.
• Augment headcount with temporary staff.
• Augment headcount with service/solution provider personnel.
• Outsource project(s).
• Outsource categories/commodities to a GPO.

Even though you might think your superiors want you to do nothing, as they give you nothing to work with, that’s not the answer. You’ll just get more budget and staff cuts. And even if you can get approval to hire more staff, that might not be the answer in the short term. It takes time to ramp a new hire up to speed, and what is given may be taken away even quicker if you don’t get results.

This says that, in the short term, your best option is typically to:

• Augment headcount with temporary staff.
• Augment headcount with service/solution provider personnel.
• Outsource project(s).
• Outsource categories/commodities to a GPO.

But the right answer is not always clear. For example, while you might be able to save an average of 10% off of your office suppliers by switching to a GPO, if you are including high cost / high volume items like printers, external storage tapes and drives, and office chairs in your office supplies, you might do better sourcing those separately. If this means that the remaining spend is not enough for the GPO, that might still be okay if you can save enough on the big spending items and just negotiate an x% off catalog pricing on the rest.

And when do you augment staff on your own versus flipping a project to a service provider’s staff? If it’s just muscle you need to get your spending in order and to run one-off analyses to find new options and to make sure spend is put through the system (to get maverick spend under control), then your best option might be to augment internally. But if you need someone to source medium- or high-dollar complex / strategic categories, you probably need some category expertise. Chances are that expertise will be hard to find, expensive, and only needed once every couple of years. Unless the candidate comes with some other useful skills, then you might want to temporarily augment your staff with expert service provider staff.

Tough questions, let’s see what we can make of them in Part III.

First things first. The findings of a recent Source One Management Services survey (summarized in Part I of a 4-part series on how Companies Face Limited Procurement Resources, available on their website) indicate that 1 of 3 Procurement departments is understaffed. Ouch! With costs climbing and GDP growth (and, thus, consumer spending) flattening, this is not a good thing. For many companies, their only option for growth is cost control and value generation through Supply Management. (Note that we are claiming cost control and not cost savings because, now that inflation is back with a vengeance, with hyper-inflation lurking around the corner, there is no such thing as cost savings, just cost control.)

So what does this mean?

1. You’re not doing enough analysis.
   Analysis takes time. More time than just dumping your AP and P-Card databases into a spend analysis tool and running the canned top-n spend reports by supplier, category, department, etc. As per our recent post on Spend Analysis – How Do You Get It Right, real savings comes from real insight which requires real analysis, which takes time, effort, and focus.
2. You’re not sourcing enough categories.
   If you’re short-staffed, you’re going to focus on the top n suppliers, categories, departments, etc. spit out by the canned reports from your spend analysis reporting tool. Some of these will have opportunities, but since you’ll already know most of these opportunities, you’ll miss many of your biggest opportunities, which are typically found in the high-opportunity tier-2 categories that never get addressed due to lack of resources.
3. You’re not finding new sources of value.
   The future of Supply Management, in an inflationary economy, is value-generation. Cost control is a good start, and in an organization overspending by 5% to 15%, it will make a big impact in the beginning. But once all of the fat is trimmed, the best you can do is reign in costs. This means that the next round of savings is going to come from identifying value-generation opportunities. Bundling and unbundling the right value added services for your organization; helping engineering identify more cost-effective alternate materials and production processes that are also more environmentally friendly, and may let you charge a sustainability premium; and identifying new market opportunities based on products and services your strategic suppliers could provide you with can all bring value to your organization.

Now what? We’ll address that in Part II.