E-Sourcing Forum » Challenges of the mid-market CPO

Challenges of the mid-market CPO

January 4th, 2007 at 06:16am David Bush - Iasta

Aberdeen has short research study available which goes into some detail about the effectiveness of supply management and CPOs in the mid-market enterprise (defined as sub $1b turnover). From a technology perspective, mid-market companies heavily favor on-demand technologies due to lower cost points. In the report, these companies adopt e-Sourcing technology at a rate of 37% vs best in class larger companies which stand at 62% utilization.

Among the recommendations for CPOs in the mid-market:

Adopt key performance indicators for procurement. These include: implemented/realized cost reduction savings; percent of spend under management; cost avoidance; procurement ROI; percent of suppliers which equals 80% of spend.
Adopt a spend analysis solution.
Build supplier teams to foster relationships and implement programs to sustain improvements.

All of these recommendations should be available in an e-Sourcing application and allow sourcing teams to build data and track results easily. It is also a good practice whether your company is $500M or $5B in sales.

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Entry Filed under: Analysts/Research, General, Technology, e-Sourcing Marketplace

1 Comment Add your own

1. Jason Busch | January 5th, 2007 at 8:39 am

Just one man’s opinion, but when I read Aberdeen’s work in the middle market, it scares the hell out of me that companies might use this information to drive investment decisions. There is no substitute in the analyst world for real domain knowledge based on experience. And Aberdeen might have that in the Fortune 1000, but certainly not the middle market.

I highly doubt Aberdeen really understands anything about true lower-middle market sourcing (from on-the-ground knowledge, in-person interviews, past experience, etc.). It is a differently animal entirely than sourcing in the Fortune 1000, and web-based surveying only creates a partial picture which may or may not be reflective of the real-world environment (for instance, I highly doubt that the sample that volunteered their information is reflective of the broader middle market). In my view, web based surveying in subjects where someone has no past domain expertise creates very misleading analysis. If you want to learn anything about the middle market direct materials sourcing, two resources I’d recommend are Mitch Free (MFG.com) and Lisa Reisman (my wife, from Aptium Global). Both live and breathe it everyday. Sure, I’m biased a bit (especially in the latter case). But I’d sooner put my good name on resources I trust.

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