Does your organization rely primarily on in-house staff to manage all of your indirect categories?
Today a number of third party sourcing solutions exist that can provide equal or superior results more economically and free up internal resources in order to focus on sourcing your most strategic categories within procurement. However, before you can find the best mix of sourcing solutions for your organization, there are a number of key factors associated with each category that need to be considered.
Key Factors in the Decision Process
Consider categories that have a strategic importance to the company. This will include categories that are key to the value proposition of the company. Also companies that make up a high percentage of the cost of goods sold. Often these are candidates to keep in-house.
On-going Maintenance and Change Management
Understand the degree to which the categories require a high level of on-going maintenance and change management with stakeholders. You may recognize these categories to be continually in a state of flux as a company’s needs evolve and the supply market capabilities change. Or a category that requires a high degree of stakeholder involvement and ownership in the supply solution. In some cases these are best kept in-house, but also are candidates for using a Group Purchasing Organizations (GPO).
Duration of the Supplier Relationship
Be mindful of categories where the duration of the supplier’s relationship with the company is long. Categories to look out for usually have a supply base that is unique in being able to meet the needs of a company or the categories have suppliers that are strategically aligned with the company’s value proposition. Here often engaging a consultant or utilizing a GPO makes sense.
Some categories demand a degree of specialized knowledge to source. Often these categories require a depth of insight into the factors that determine cost, require experience in how to best structure the RFP for the category or require knowledge of the structure and make-up of the supply base. Here benefiting from the experience and expertise of consultants or GPOs can be of benefit.
Another factor to consider are complex or analytically intensive categories. Such categories require complex specifications that impact cost, involve numerous segments of the organization with unique demand or utilize a spec driven cost model to price the items in the category. You may also find that analytically intensive categories often have massive amounts of skus and numerous subcategories. In this case again you may benefit from what a consultant of GPO can offer.
Benefit From Bundling Services
Acknowledge the degree to which the company can benefit from bundling services with sourcing. The categories you should look out for will have a significant component of ongoing manual transactions or can benefit from outsourcing inventory management, sku rationalization, etc. due to lack of in-house skills or the desire to develop them. Here you may want to consider integrators or outsourcing firms.
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