A procurement organization has just launched a new eSourcing tool. OK, now what?
Here’s what – it’s time to start using it.
Time to build a sourcing pipeline.
A sourcing pipeline is the plan that identifies specific categories or contracts to be sourced, a time frame for the sourcing, the key stakeholders to be involved, and the resources that will support these projects. The development of a robust sourcing pipeline that prioritizes projects based upon enterprise objectives takes a blend of art and science. I think it goes without saying that the development of a sourcing pipeline remains one of the most important activities for any procurement organization. And yet, even mature organizations struggle to develop and maintain them.
So how should a procurement organization build its first sourcing pipeline. Where should it start?
Maybe the first question that should be asked is when should it start building a sourcing pipeline? The answer to that question, in any scenario, is always immediately [Sidebar: this holds true for groups that have ongoing eSourcing or offline sourcing programs too - you can never start too early in building a sourcing pipeline]. So, as you begin plans to deploy an eSourcing solution, in parallel, you should be working to identify the best opportunities for sourcing.
So, where to start?
I. An obvious place to start is with your spend. The truth is that many teams that are deploying eSourcing and/or really focusing on sourcing for the first time may not have great visibility into their spend and may not have tools that can help them attain it. Nonetheless, teams must make the best of what data they can access and work to identify opportunities.
II. Another good place to begin is to try to get a list of “usual suspect” categories from your eSourcing solution provider (or consultants) who should be able to provide a list of “quick hits” or “wave one” categories to source. Getting a quick hits list or several lists (from different providers and consultancies) can really jump start the process by helping teams narrow down the list of all potential categories to source to a more manageable list. In general, I would say that the lists on the indirect side should all be pretty standard across the different providers (although some lists will include the provider/consultant’s specific areas of expertise), while the direct side lists will be standard within industry or type of production.
III. Ask your team. They are closest to the categories and
will should have ideas. Reward those that participate. Your team should be a great resource; but, it is quite common for sourcing and procurement pros to be hesitant to participate in a new eSourcing program – here is a list of ten common excuses why eSourcing won’t work and how to combat them.
IV. Ask the budget holders. What do you need this year and when will you need it? Unfortunately, it is even more common for stakeholders to be hesitant to participate in a new eSourcing program. Sell the program to the leadership and guide their support so that it will flow down to the line of business.
IV. We published a list a few years ago – CPO Rising’s quick list of 10 categories to source – some may have been time sensitive, but others were not.
Once you’ve identified a long list of categories, how do you prioritize them? That is the next sourcing-themed question we will look to answer (we will do this soon, but not next time).
Postscript: For our discussion today, we have assumed that our hypothetical department has followed standard eSourcing deployment best practices and needs to get some momentum before it enacts eSourcing 2.0 as a standard policy. eSourcing 2.0, as longtime readers can tell you believes that “every negotiation that results in an executed contract should use an eSourcing solution.”