Category Archives: Guest Author

The Importance of Tail-End Spend Management


Today’s guest post, which is part one of a two-part series, is from Gonzague de Thieulloy, a Managing Director at Xchanging Procurement who manages tail-end spend management programs at Xchanging’s largest European customers.

Tail-end spend management is finally becoming a procurement priority, and for good reason. Historically, procurement organizations have been focused on trying to manage their strategic spend, the 80% of spend that represents around 20% of their suppliers. While companies have been striving to manage those strategic suppliers, they’ve left the myriad of smaller suppliers — the ‘tail-end’ of the spend — unmanaged. But that is starting to change.

Until recently, you would have been hard pressed to find any company managing their full strategic spend properly. Ten years ago, most organizations were only confidently managing 40-60% of that spend, at best. Now, due to procurement’s increased visibility and greater strategic role, many companies are managing their entire strategic spend effectively — the full 80%. This has left more than a few companies wondering what they can do with the remaining 20%, not least because of the financial benefits. Everest Group suggests that inclusion of tail-end spend increases procurement outsourcing savings potential by 1.5 times. But this is just one reason to manage tail-end spend.

Complexities of Tail-End Spend

However companies are discovering that they can’t use the same procurement methodologies for tail-end spend as they have for their strategic spend. For one thing, tail-end spend is far more complex than strategic spend: there are many more suppliers, the spend is very fragmented, and there are a lot more individuals buying. Tail-end spend “buyers” are end-users: people in HR, marketing, finance, IT, and so on — ordering goods and services as needed. They are not professional buyers, in the traditional procurement sense, which means trying to manage this spend requires change management — an added layer of process. As long as the total cost is less than the agreed threshold for tail-end spend, then these “buyers” can place orders with whomever and however they want.

Tail-End Spend Risks

Not only is the 20% tail-end spend complex, it can also be very risky, which is another reason organizations are now starting to pay attention to it. With the 80% spend, companies typically have an experienced buyer managing key suppliers and auditing those suppliers on a number of different aspects. The company that is on the ball knows everything there is to know about their strategic suppliers: whom they work with, their values, their practices, their working conditions, who their suppliers are, etc. With unmanaged tail-end spend, nobody is looking after these suppliers. Companies have no idea who they are buying from, making them susceptible to a number of risks.

One such risk is the potential damage to a company’s reputation. With all of the corporate sustainability issues now in the spotlight, unmanaged spend means companies may be doing business with suppliers that violate their own CSR principles. Imagine the harm it would do to your brand if it were discovered that one of your suppliers was using child labor or heavily polluting the environment. The damage could be irreparable. Beyond brand damage, you would also be responsible for supporting companies carrying out these practices. The reputational impact alone could put your company into a tail-spin.

Another type of risk that is common of unmanaged tail-end spend is a best practice risk. When companies let people from across the business buy from whomever they want, there is a chance that they will just buy from a personal connection, or from a supplier with whom they have a historic relationship. This often results in individuals overpaying for what they are buying which is, of course, financially damaging to the company. But more seriously, they may be in breach of fair practice regulations, putting the company at risk of being sued.

Companies that fail to address this complexity and risk are leaving a lot more on the table than they think. In tomorrow’s post, we will discuss the tail-end spend solution.

More information on Tail-End Spend Management can be found on Xchanging’s Tail-End Spend Management page.

Thanks, Gonzague!

Navigating & Keeping Up with Digital Agency Landscape: Part II

In this three-part series of articles, Kathleen Jordan, Associate Director at Source One Management Services takes a look at the complex digital agency landscape and provides insight on the process of agency sourcing: considerations when sourcing, vast digital agency options, and the need for bridging the gap between marketing and procurement departments. Kathleen Jordan is a strategic sourcing subject matter expert with a wide range of experience in the marketing category who works closely with marketing professionals and helps alleviate challenges encountered when overseeing agency relationships.

In Part I of this series we reviewed common considerations for sourcing digital agencies. Continuing on, today we take a look at the vast types of digital agency options and what they mean for a company’s sourcing strategy.

The Many Agencies

One of the most challenging phases during an agency search is building the initial list of agency candidates and ensuring the list meets the basic criteria. Some vetting will be required through an RFI process or onsite capabilities presentations prior to the RFP phase and pitches. When a marketing professional casts a wide net into the digital agency pool, they will find a combination of large full-service digital agencies and smaller, more specialized agencies.

There are agencies that define themselves as primarily social media agencies, whereas other shops are comprised of digital developers — agencies that develop mobile apps, websites, etc. Other agencies are focused on search engine marketing — the leading required service and foundation of digital marketing, in which SEO and paid search campaigns are managed. There are also suppliers that offer analytic services where consultants study the results of a digital campaign and advise where tweaks should be made, tracking against key performance indicators and indicating ROI results. The list goes on to capture various other forms of digital marketing services such as the full-service model, website design and user experience, display advertising, e-mail campaign management, CRM platforms, etc. Todd Wasserman of Mashable wrote an article calling out a few additional agencies on the rise, including:

  • Viral video factories
  • Agencies specializing in the development of GIFs, referred to as “the animated billboard for the digital age”
  • Agencies focused on creating digital IDs for products; for example, ask yourself: What if my washing machine could recommend a trusted local service agent to perform maintenance or address issues when needed? These agencies are looking to make physical things smart, allowing a product to have its own digital profile.

Referring to the ever-changing digital marketing world, Wasserman writes, “this state of flux has swung open the doors for entrepreneurs, usual refugees from big agencies looking to capitalize on new opportunities while their counterparts are riding the TV gravy train to the last stop“. Overall, the digital landscape is continuously shifting, and some brands are already beginning to think about post-digital. Digital Marketing Depot’s whitepaper also notes that “dozens of specialty agencies have launched over the past five years” and the number continues to grow. In addition to Wasserman’s remarks about this trend, Digital Marketing Depot believes that the rise in specialty agencies was “prompted by the mid-market opportunity created by holding company agencies with huge minimum spends, and wireless technologies that have made it easier to start up small businesses“.

There is no right or wrong way to allocate your digital requirements across an agency network. The optimal model will depend on a company’s overarching marketing strategy and internal resources. A marketer may find that their current creative agency that supports their traditional advertising tactics is best suited to handle their digital channels as well. After all, the account management structure already exists and price breaks may be applied if the scope increases.

Regardless of the digital requirement that needs to be fulfilled, marketing professionals should keep in mind that their procurement counterparts can serve as decision support to help identify the agencies best suited to meet the advertiser’s needs. In the final part of this blog series, we’ll explore the need to bridge the gap between marketing and procurement.

Thanks Kathleen!

Navigating & Keeping Up with Digital Agency Landscape: Part I


In this three-part series of articles, Kathleen Jordan, Associate Director at Source One Management Services will take a look at the complex digital agency landscape and provide insights on the process of agency sourcing: considerations when sourcing, vast digital agency options, and the need for bridging the gap between marketing and procurement departments. Kathleen Jordan is a strategic sourcing subject matter expert with a wide range of experience in the marketing category who works closely with marketing professionals and helps alleviate challenges encountered when overseeing agency relationships.

Defining Your Requirements

The marketplace for marketing services is anything but easy to navigate. It is complex, and crowded with a wide range of agency options available to fulfill any marketing support requirement. Niche and full-service players exist, some agencies operate independently, and remaining ones are owned by a holding company. Sister agencies compete against one another or may team up to offer a comprehensive service offering. Mergers and acquisition are relatively frequent and can consequently lead to conflicts of interest. Overall, there are a number of considerations when you are seeking out an agency to support a new marketing channel or upcoming product launch. And these considerations should be known even if there is no forthcoming agency search or new marketing tactic on the horizon to support. Marketing professionals and their sourcing colleagues must always be aware of the current state of the marketplace for marketing services to remain competitive and innovative, especially when it comes to the digital space.

Digital Marketing continues to evolve due in part to the various technologies that apply to digital tactics. Advanced technology and digital marketing as a whole have reshaped the way consumers interact with brands, and digital agencies have emerged to support the various digital channels and technologies that exist. It is vital for marketing professionals and their sourcing counterparts to recognize this and determine what type of expertise they wish to obtain to supplement their internal marketing team and fulfill a specific scope of work. Digital Marketing Depot’s whitepaper titled “Digital Advertising Agencies 2014: A Buyer’s Guide” (download required) serves as a great resource for marketing professionals, defining various types of digital agencies and how and when they should be engaged. Overall, the report provides an accurate snapshot of the current digital landscape and guidelines on how to effectively work with digital agencies across the various service types.

The initial starting point is validating the need to conduct a digital search. Consider:

  • Is the marketer unsatisfied with their current digital shop and looking to transition?
    Review and consider the performance of the current agency. Common reasons for dissatisfaction include: missing deadlines, under-delivering, and poor communication, especially when several agencies work together on a project.
  • Is a new digital channel under consideration that would lead to an increase in scope, impacting the current retainer model?
    When looking to implement a new digital tactic, consider the potential for scope creep. This can occur when a project is poorly defined and can end up consuming allocated budgets.
  • Is there an upcoming product launch in which the consumer base has a strong digital presence?
    Review the campaign you plan to implement. Are the tactics you plan to use offered at your current agency? Is it something a specialty agency would be better suited handling?

Once the objectives are clearly outlined and the scope details are ironed out, the agency selection criteria should be established. This criteria will dictate the search in its entirety and should tie directly to the scope requirements. For example, if the scope is strictly website development, a social media monitoring agency is not nearly the right fit.

With these activities complete, you can move on to agency selection. We’ll explore this topic in-depth in Part II of this three-part series.

Thanks Kathleen!

Risk Management in Migration to Low-Cost Countries, Part I

Today’s guest post is from Diego De La Garza, Senior Project Manager at Source Once Management Services, LLC, and Source One’s expert on sourcing in Latin America.

A few decades back, corporations started to talk about migrating costs to low-cost countries. These discussions were driven by the inherent advantages that locations in East Asia, Eastern Europe, and Latin America presented. Today, this is no longer merely a strategic notion but a well-established commercial trend. Efficient migration to low-cost countries has become a necessary, competitive trait.

One of the primary reasons companies decided to migrate to low-cost countries in the first place was precisely to mitigate risk, whether by reducing cost or by decreasing the probability of supply chain or operational disruption. Eventually, this strategy became so popular that companies understood that without implementing structural changes to reduce their cost base, they could perish. Consequently, as the trend evolved into a global practice, it became clear that ignoring low-cost country sourcing within the corporate agenda was a risk itself. Today, the global sourcing paradigm is complex, and in many cases, world class organizations are now even moving out from well-known countries in Asia to “nearshore” locations in Latin America.

However, as ironic as it may be, low-cost country sourcing is so intricate that it carries significant risks if improperly managed. This preamble sets the tone to our main discussion, as risks factors, whether known or strange, will present themselves regardless of the low-cost country strategy.

Common sense dictates that risk mitigation must begin with proactive and diligent research on risk potential before setting a comprehensive strategy for the migration process. Surprisingly enough, many corporations overlook this first step because foreign market research can be both expensive and time consuming. Regardless of how arduous the efforts are, some risk factors will not be identified easily or early enough. Thorough research and preparedness will always prevail as the first risk mitigation strategy. That said, many risks of low-cost country sourcing today are well-known, and best practices will facilitate managing risk from the initial stages of the migration process.

Typically, low-cost countries are surrounded by some level of both reputation and myth. Getting to know the real landscape is paramount when migrating costs. The first premise that comes to mind is that low-cost is associated with low quality. Generally speaking, this is not true, especially when we understand the strong industries in the markets we pursue. The likelihood is that where there’s expertise and a well-established industry, quality will not be an issue. What we need to determine instead is whether the location in scope has the adequate environment to sustain and develop the industry in the long-term. Beyond generating an understanding on local suppliers, labor rates, and raw materials, corporations must consider multiple areas of risk and audit the local market itself.

This is particularly important because any company migrating a manufacturing process or even a service should determine if the local market itself would be receptive to it and support regional demand. This step would mitigate risk by reducing costs and opening new markets, making the location an efficient link within the supply chain and a source of revenue.

However, quality is just one concern that needs to be considered when outsourcing to a local market. In Part II, we will explore some of the other risks that need to be addressed.

Thanks, Diego.

Simply Your Procurement Life and Eliminate the 5 E-procurement Mistakes You Don’t Realize You’re Making

Today’s guest post is from Iyana Lester, a Project Analyst at Source One Management Services who specializes in contract management and negotiation, project evaluation and monitoring, and market assessments.

Along with the boom of internet-based business came the challenges of maintaining an effective supply chain in the digital space. E-procurement offers a seamless solution to streamline processes and improve compliance all while reducing cost. While e-procurement has been around for several years, there still remains several factors that impede businesses from utilizing it fully and attaining maximum savings largely based on their expectations.

A recent Procurement Insights article points out that merely assuring yourself you’re doing everything in your power to maintain supplier relationships isn’t enough. “Even if you are well-versed in procurement and can speak every language in existence, nurturing complex supplier relationships in a global spectrum requires frequent communication that often slips without a system to manage the contact.” So what does this mean for organizations considering the shift?

Inform yourself of what’s out there before committing to one e-Procurement solution. More importantly, become educated on the user short-fallings that lead people to assume that their solutions aren’t optimal. This will allow the largest-scale view of your options without any user-impairment bias. By ensuring your expectations are reasonable, you’re conveniently building yourself a ladder out of a situation coined by Sourcing Innovation as Procurement Damnation. Whether you prefer it as a remix to AC/DC’s Rock ‘n’ Roll Damnation or a procurement state of agitation, you can’t anticipate unrealistic savings and results from an e-Sourcing platform. These solutions are helpful in approaching the challenges of global sourcing, but they are only 100% effective with a strategy that supports them.

Below is a list of several of the most common shortcomings faced in e-procurement. As you develop your e-Sourcing options, keep these organizational glitches in mind:

1. Poorly Implemented Systems

This issue stems from a lack of initial planning. The systems must be integrated with existing corporate systems so that they will be interacting all the way to the end user’s interface experience. They should also be implemented quickly to accomadate any rapidly-developed new technological advancement. Failure to consider any of these focuses can result in systems that aid in one area of the procurement process but cause harmful disruption in others.

2. Partial Implementation

When implementing any large scale change, the change must be adopted and interconnected organization-wide to achieve optimal outcomes. To successfully implement e-procurement, your organization needs to carry out a detailed evaluation of its procurement processes and consider the needs for each division. Roles will continue to depend on effective collaboration between many different organizational players. This will assist in preparing proper agendas and budgets.

3. Uninformed to the Latest Technological Advancements

Monitoring advancements in e-procurement technology will serve as a guide for key risk concerns that should be in your organization’s radar. Observing technological advancements will lessen the chance of your systems becoming outdated.

4. Failure to Develop Performance Metrics

Many organizations have the mentality that once a system is in place, all advantages and will be manually achieved. Considering a comprehensive set of metrics provides a better framework for benchmarking and allows for the procurement process to be more effectively managed. Some metrics areas to consider may include effectiveness, efficiency, quality, and cycle time.

5. Unsuccessfully Identifying the Issues at Hand

A system cannot effectively solve a problem unless the true problem is identified. Organizations often identify sources and causes of the problem and look for fixes that will only temporarily improve the issue. To capture the full potential of your e-Sourcing, never close your eyes to developments and minimize your exposure to Procurement Damnation by following the above steps. The most effective procurement management systems are constantly adapting their capabilities while remaining user-friendly and consistent. Procurement departments should be mindful and eager to pursue new functionalities wherever possible without compromising supplier data quality.

Thanks, Iyana.