While Chief Procurement Officers have begun to favor collaboration more and more as a main strategy to drive savings each year, sourcing and supplier negotiations remain the primary (but, not only) levers or tactics to identify and then realize savings.
Recently, more of our conversations and advisory work with procurement organizations have been with companies in need of spend visibility, a sourcing strategy, and many times, both. I should note that despite our experience and strong interest in this area, Ardent Partners’ does not pursue strategic sourcing or spend assessment projects [Sidebar: In case you were wondering, Ardent’s advisory work with practitioners tends to focus on solution selection, strategic advisory, and benchmarking as described here].
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. Despite this importance, many procurement teams struggle to develop, execute and maintain active pipelines. The many different reasons why procurement/sourcing groups struggle in this area cut across the key people, process, and technology areas.
We believe that the collection of strategies and recommendations that we publish on CPO Rising, in aggregate, place procurement groups in a better position to build sourcing pipelines that deliver greater value. Over the next few articles, we’ll look at some of the specific strategies that Best-in-Class sourcing groups use to build their pipelines.
It is important to note that we believe that the development of a sourcing pipeline is very important for those procurement groups that are not focused on savings too. This point was reinforced in a recent conversation that I had with the global eSourcing leader of a large oil and energy company. The top priority for his procurement department and company as a whole, is, above all else, safety. The urgency with which some groups pursue savings is matched by his group’s pursuit of safety. It is their view that sourcing remains the best way that the procurement department can identify the highest-value suppliers who, in this case, are the ones who provide the greatest level of “safety” across the items and services that they provide. The many thousands of projects that this leader’s team supports each year place it among the largest sourcing programs in the world. The fact that they are more focused on non-price attributes in awarding their contracts is beside the point. They get great value from eSourcing and use a sourcing pipeline to manage their activity.
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