The Biggest Obstacle in Sourcing – How Much is it Costing Your Organization?
CFOs and CPOs want to drive positive change in their organizations. The biggest obstacle they typically face in sourcing is resistance to change in the procurement group. Team members are comfortable with spreadsheets and questionnaires they use even if they are feeling overworked. It is understandable that if someone is overworked they certainly don’t want to add more to their plate. They will only commit to change if they believe the benefits will be real or they are forced to change. The latter approach may be uncomfortable but necessary in some situations.
Let me provide a small sample of the time and hard cost savings with quality information and tools that will be readily available by using a true eSourcing solution:
Sourcing templates that:
- Can be easily replicated
- Modified in whole or part
- Can be shared across the entire organization
- Can accumulate cost and usage data
The total spend:
- By commodity, SKU or item
- By each internal center (division, profit or product line)
- By supplier ranked for concentration
- By supplier on all related and unrelated items
- Ensuring that every contract is thoroughly evaluated and renegotiated well in advance of the automatic renewal date
- Terms and conditions comparisons to highlight unfavorable items for elimination or renegotiation
Some of the pitfalls that will be avoided include based on my experience:
- RFP’s prepared using Excel, Word and Email typically take 40% to 50% more time than needed with an integrated system and can result in a less than ideal decision
- Procurement teams waste valuable time “working around” the existing RFP platform because it is too cumbersome and frustrating to use
- Purchase agreements renew automatically without review because there isn’t enough time to review them in advance, key terms are not easily accessible and a central repository for all divisions, profit centers or entities doesn’t exist
The one benefit I haven’t mentioned is the hard cost savings that are typical with a well-designed cloud based sourcing platform. Savings of 10% to 20% are common without sacrificing quality.
Action Step: What would be the next step?
If your procurement team is still suing Excel, Word and Email or they are working around a more cumbersome solution call me to set up a demo. In 30 to 60 minutes you will know if the solution I represent will work for your team. The benefits go way beyond cost savings. Your team will be smiling because they will know they are making a significant contribution to the profitability of your organization.
Next week I will continue on this same theme so your organization can improve your bottom line.
If you would like to know more ways to reduce costs without changing the way you do business simply give me a call or send me an email with your contact information and the best time to reach you.
You Won’t Drift to Success©
Think about it.
Until Next Time, I Wish You Great Success in Your Business and in Your Life