Exerting influence on spend or, better yet, exerting proactive influence on spend is one of the major goals (compliance is another) in placing spend under management. When it comes to sourcing, being engaged with some reasonable lead time and having the ability to plan and prepare for a sourcing project increases the sourcing team’s ability to influence results and achieve a more favorable outcome.
We recently discussed the importance of having and maintaining a sourcing pipeline, arguing that that the development of a sourcing pipeline remains one of the most important activities for any procurement organization. This is true whether or not savings is the top organizational priority. Despite the importance in building pipelines, many organizations struggle to develop and maintain them. Now, we define a sourcing pipeline as 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.
Continuing with the article, Building the First Sourcing Pipeline – Getting Started, we discussed the different sources available to help a sourcing team identify a long list of category sourcing opportunities. Specifically, we suggest starting with (1) a spend assessment/analysis (2) leveraging your eSourcing provider or Strat. Sourcing for a list of usual suspect categories (3) your sourcing staff and (4) budget holders. To that list we should add (5) a search of any contract repository to determine what, if any, contracts are coming due in the next six to eighteen months. These five sources should help identify a large group of sourcing opportunities or at least categories that are worthy of additional investigation. Since the goal is to build a pipeline that is overflowing, the inclination should be add and not eliminate as many categories as possible during the identification process.
Once you have identified numerous potential categories to source, the team must work to prioritize them into some type of order or what is often called developing or bundling categories into sourcing waves. This is done by looking at various aspects or factors related to the category. These are the factors we’ve identified:
- Internal or Organizational factors
- Market factors
- Supplier factors
- Buying factors
- Category factors
The development of a robust sourcing pipeline that prioritizes projects based upon enterprise objectives takes a blend of art and science. Over the next couple of articles, we’ll focus on the science aspect of developing a sourcing wave strategy and look at the different factors above in more detail. We will then work with you to build a comprehensive “Category Sourcing Scorecard” that can be used to develop your sourcing wave strategy.