Procurement category strategies need evidence

Guest blog from Alison Smith, The Purchasing Coach

One the hardest things when developing category or sourcing strategies is to stop anyone making the decision before all the facts and data have been gathered and analysed, and all the options identified and assessed. Without the facts and data that provide the total cost and benefit of all the options available how can anyone make a decision?

Emotion is a strong motivator but it doesn’t always deal in logic. “We should go with this supplier” is only a valid strategy if sufficient information is available to tell the story of why. “Because the current supplier is useless” is not an acceptable reason. They might be – but why, what does useless look like, what’s the cost of that poor performance, what options exist to improve the current supplier, what are the business requirements, what are our current costs, what other suppliers are in the market, what criteria are important when making the decision, what are all the options that are available, what will all the costs and benefits of those options be and so on.

I know it’s tempting to say let’s:

  • Terminate this supplier – before we realise the contribution we’re making to their poor performance
  • Single source – before we’ve analysed the data and realised there’s no single supplier able to take on 100% of our requirements
  • Dual source – before we realise only one supplier can meet our needs and we’d be better adopting supplier relationship management with them
  • Tender – before we realise the business requirements require a complete overhaul and what we tender for today would not delivery any value improvements until that happens
  • Outsource – before we really understand what we’re wanting to outsource
  • Develop the relationship further – before we realise the supplier is exploiting us

When developing category or sourcing strategies we need to develop the business requirements, understand the supply market, undertake supplier analysis, understand the costs and supply chain. It’s only by undertaking this analysis with rigour that we can determine the options, assess these options against the criteria and then make a recommendation.

I found myself writing the other day that “senior management approval will only be achieved if we are able to provide evidence of the efficacy of our recommendations.” If emotion and subjective statements are our only response we’d best be ready for a disappointment!

I was very pleased with our presentation of a sourcing strategy to a senior leadership team recently. We presented a 10 page summary document. Every question they asked we were able to provide an answer and the evidence for it – either in the 10 pages or with reference to a larger 90 page document and multiple (and I mean muliple) excel worksheets. We never once uttered the words “we haven’t thought of that” or “I don’t know” because we’d done the analysis and we had all the answers (I do so love excel spreadsheets :-)).

That’s how procurement adds value to an organisation in understanding the value that can be added once, and only once, all the facts and data have been gathered and analysed.

by Alison Smith

Alison Smith a.k.a The Purchasing Coach is an experienced operator in all things procurement. She helps clients inspire communication, collaboration and change in purchasing, procurement and strategic sourcing teams. Drawing on a deep understanding of not only good procurement practice, Alison is also a Master Practitioner in NLP and brings this expertise to clients seeking to bring behavioural change in their organisations.

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