This week’s featured event (hosted by ISM and sponsored by Zycus) was primarily presented by Spend Matters’ Jason Busch. The webinar was recorded and will be available on ISM’s webinars page.
For all the efforts we have made to implement eSourcing solutions and build better relationships with our internal stakeholders, realized savings still lags behind negotiated savings. To minimize this loss, or ‘savings leakage’ as it is often called, we need to rethink how we define stakeholder and supplier engagement, and we need proper communication and collaboration at all stages of the sourcing, contracting and implementation process.
The strategic sourcing processes that we have come to know (and sometimes come to love) have multiple steps, only a few of which are actually sourcing, and yet those steps dominate our time and effort. The other steps, like market research, contracting and implementation, often get short changed or handled as peripheral efforts. But if we do not have an effective implementation process, we risk losing our negotiated savings.
Although technology is certainly a part of any major procurement effort, the message I took away from this event was that most implementation challenges, especially those that result in savings leakage, are best addressed in a hands-on manner. The best implementations are smooth and swift, maximizing speed to savings, shortening the volume ramp-up, and ensuring quality.
Since savings is the primary metric for the majority of procurement departments, that tends to get the headlines and the emphasis. Creating an equal level of accountability for implementation requires that we put in place similar ways to track and measure our success. Delays during implementation cause lost savings but also increase the costs associated with the category.
Cooperation between functions such as procurement and operations is critical and must be in place long before the implementation begins in order to be effective. Jason spoke about the idea of ‘silent sabotage’ by internal stakeholders: the intent to delay an implementation by discovering new requirements at the eleventh hour or being hard to reach for roll-out meetings.
Sabotage attempts aside, stakeholders both require and deserve empathy. Breaking from an incumbent supplier and implementing a new one both require a great deal of patience and additional effort. While processes need to be properly documented, a hands-on approach with operations will go a long way towards the success of the implementation and the beginning of what will hopefully be a productive new supplier relationship. As much as contractual service metrics are important, they mean relatively little if the internal stakeholder is not satisfied.