Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. This week, I’ll be reviewing a piece of research entitled “Reaching Sourcing Excellence, Part 1: How To Keep 30 Cents of Every Dollar Spent” from AMR Research.
This research focuses on the reasons that sourcing programs aren’t as effective as they could be. AMR’s research claims that many sourcing organizations are failing to realize 30 cents of savings for every dollar of spend (for non-US readers, that’s 30% of spend).
So what can a sourcing organization do to capture all of the savings that’s possible?
AMR cites three recommendations:
- Deploy and use technology;
- Mandate skills and training for employees; and
- Put the fundamental piece of the puzzle in place
I’ll elaborate on each of these points.
First, technology. You may think that the 30% of unrealized potential would be cut into by deploying basic sourcing/auction technology. Actually, AMR says that the 30% unrealized potential is calculated after organizations have already saved 10 – 20% by deploying the basic technologies. AMR claims that advanced technologies with “broader sourcing capabilities such
as optimization, and opportunity identification and execution across the entire sourcing workflow” can help a sourcing organization add 15 – 20% savings on top of the savings resulting from deployment of basic technologies.
Second, skills and training. This research piece makes it clear that lack of well-rounded skills and comprehensive training represent a clear obstacle to an organization’s ability to achieve its profit improvement potential. Poor performing organizations do no training, while others misguidedly feel good about providing training on their technology systems. But training that lacks a focus on the skills critical for sourcing success is inadequate. AMR suggests that “technology by itself has been only a tactical solution because sourcing skillsets are improved for tool use, not the strategy or dynamics behind the philosophies, negotiation strategies, or business profitability requirements.”
Finally, the fundamental piece of the puzzle. What is this “fundamental piece,” you ask? It is aligning the sourcing strategy with business objectives.
This research piece goes on to share a seven-step sourcing process and three approaches to sourcing used by an $8B North American telecom company.
You’ve probably noticed “Part 1” in the title of this research piece. There are apparently four more pieces forthcoming to complete this series. Because this piece was so well-done, I am really looking forward to those additional parts and hope to review them right here on this blog. So stay tuned!
You can get your own copy of this research piece from AMR’s Web site (search for “sourcing excellence” from their home page). While most of AMR’s research of this nature is limited to paying AMR Research clients, this particular document is available simply by signing up for a free “preview account.” If you’ve tried to get access to this type of material from other analyst/research firms, you know how exciting this is! It is definitely worth checking out!
To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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