Sustaining Strategic Sourcing Wins

April 19th, 2007 at 07:46am David Bush - Iasta

I found this interesting article, written by Eric Issa of Kanbay. Ironically, this first appeared on Line 56, but we all know about that and it is no longer available. In this article, the author mentions four enablers that must be addressed to ensure a successful roll-out and savings over the lifetime of your company’s strategic sourcing project.

1. Organization — Center-Led Versus Centralized? A sustainable, long-term procurement organization sponsored at the executive level, where authority, roles, responsibilities and individual performance metrics are clearly defined. Stakeholders must buy into the organization and be aligned along common objectives. Ideally, this organization is in place at the beginning of the strategic sourcing initiative and its structure supports continuous improvement.
2. Skills — Continuous Improvement - Sourcing professionals must develop and maintain proficiency in all aspects of the sourcing cycle. Organizations need to identify the knowledge and the skill sets of their procurement staff and develop the specific training plans to close any knowledge gaps.
3. Processes & Technology - Procurement organizations and suppliers must invest the necessary time and effort in planning a smooth transition and putting in place the appropriate tools and technology that will automate or facilitate viewing online catalogs, issuing purchase orders via auto-fax or electronic data interchange (EDI), monitoring purchase orders (PO) status with online collaboration solutions, etc.
4. Performance Measures — Be Specific. A formal set of measurement processes should be put in place to track usage, pricing, user compliance to established contracts and supplier performance, especially if financial incentives and penalties are contingent upon a supplier’s compliance to service-level agreements (SLAs).

The story ends with sound advice: Strategic sourcing alone can deliver substantial cost savings, often resulting in significant improvements to financial performance. It has been used as, and continues to be, a popular cost reduction tool. But without the supporting organization, processes and technology, skills, and performance measures in place, those benefits will never reach their full potential, impeding companies over the long-run from optimizing their cost efficiencies and profitability.

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Entry Filed under: General, Supply Management Best Practices, Technology