Spend Management

This week Zycus and Ardent Partners presented ‘Sourcing for Value: Using Non-Price Attributes to Find the Best Suppliers’. Historically, not making an award decision based predominantly on price has been a reason stakeholders give for not wanting to follow the strategic sourcing process. Today, procurement professionals and the technology they use are accustomed to incorporating quantitative and qualitative measures of value into optimization scenarios and award decisions.

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This week’s Wiki-Wednesday article is about the challenges of capturing savings due to cost reduction and avoidance. One of the sections addresses Total Cost of Ownership (TCO), and the difficulties of calculating and reporting on those costs.

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This week’s featured webinar was presented by the Next Level Purchasing Association and featured Joe Payne and Bill Dorn from Source One Management Services as the main speakers. You may also know them as the co-authors of ‘Managing Indirect Spend’, a relatively new publication that walks through the challenges and opportunities associated with indirect spend as well as a few category-based case studies.

Like their book, the guys from Source One kept their speaking points to the practical learnings from their extensive combined procurement consulting experience.

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The preface to The Procurement Game Plan by Charles Dominick and Soheila Lunney starts with the question, “Why another procurement/supply management book?” Good question.   For a constantly evolv...
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This week’s featured webinar was presented by CPO Agenda: ‘Practical Steps to Strategic Sourcing’.  Their selection of this topic has interesting timing, as Strategic Sourcing was just crowned as the ‘champion’ in the CPO Rising March Madness tournament

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Today’s eSourcing Wiki-Wednesday topic outlines the many roles and responsibilities associated with being a successful sourcing professional. One of those roles is to provide ‘deep domain expertise’:

Management, members of the individual procurement organizations, and stakeholders will all expect the procurement professionals in the center of excellence to have deep domain expertise, especially in strategic categories.

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For anyone that has ever run an eSourcing project, there is a typical flow that most processes follow. The project kicks off, and everyone’s focus is split between costs and known issues with the incumbent suppliers(s). Procurement uses historical spend to put together a list of line items with quantity and specification data. The company’s standard list of supplier questions is loaded into the eRFX system, along with any additional questions for suppliers that relate to the category of spend in question or new developments in the industry being sourced from. Everyone works frantically until the day the RFP opens and then – you wait. The project comes to a complete standstill for the two weeks (e.g.) that the RFP is open. Then the mad dash begins again as you wade through and evaluate supplier responses, pricing, and attachments.

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This week’s eSourcing Wiki-Wednesday topic is Metrics for the Rest of Us – an article that breaks metrics down into Cost Avoidance and Reduction, Process Improvement, Operations, Customer Service, and Asset Utilization.

The last of the Cost reduction and avoidance metrics, “Spend Under Management” is defined as: Total Spend Under Management / Total Spend.

As noted in the eSourcing Wiki, this is a straightforward calculation. The problem is not with our ability to divide one number by another, but in defining the inputs to the equation. Total spend should be easy, although your department may use either total annual spend or total addressable spend (which is likely to exclude taxes and salaries). The real question is to decide what spend is designated as being ‘under management’.

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This week’s featured webinar is ‘Tail Spend Management: How to Squeeze Savings from the Most Fragmented 20% of Spend’ by Proactis. If you are interested in more after reading our notes, you can access a white paper on Proactis’ site.

 

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This week’s eSourcing Wiki-Wednesday topic is Sourcing Success Enablers.  Under the Organizational Best Practices heading is a brief paragraph that gets to the heart of what all procurement and supply management departments need to stay focused on:

“As part of a supply chain focus, successful companies do not overlook indirect categories. Chances are some categories (such as office equipment, professional services, etc.) consume a significant part of the total organizational spend and will also benefit from a review. Strategically source everything. (Often strategic sourcing means outsourcing procurement of non-critical, low value spend, or commodity categories to external organizations that also follow strategic sourcing principles.)”

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I spent the last couple of weeks reading The Contract Negotiation Handbook by Stephen R. Guth Esq., and despite how it may initially sound, I came away with one critical realization: I am a pop tart. ...
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When I am reading the books that may end up on the Buyers Meeting Point Endorsed Publications list (in the Procurement Library), I often find that they are missing a certain… something? Now I know wha...
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Mike Buchanan, author of Profitable Buying Strategies (as well as Two Men in a Car, Guitar Gods in Bed, and The Marriage Delusion), agreed to participate in a Q&A session with Buyers Meeting Point...
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I see this week's ISM event as being part of a recent increase in interest about the procurement of services.  I’ve worked in this category and it is truly a beast all its own. They mentioned visibility in their event description, and although that is a common enough concept in procurement it is the whole deal with meetings spend. While all services projects are complicated due to the relationships in place, addressing meetings spend has its own sensitivities. Not only is it a relationship-heavy category, but the times when meetings need to be managed are usually of high importance and high visibility.

You can listen to an on demand version of the event here.

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This week’s Wiki-Wednesday topic is financial statement analysis, and hopefully you’ll believe me when I say that if I can get comfortable with this, ANYONE else can too. Financial statements are not always easy to read, but with risk management and new supplier identification on the docket, the time has come for all of us to get used to doing it.

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When I was planning out this week's content, covering Master Data Management as our Wiki-Wednesday topic seemed like such a good idea. We were already looking at the subject through Philip Gunn's presentation from eWorld and I didn't know as much about it as I would have liked. Then Tuesday came and I found myself less jazzed about the idea than I had been. The irony of that feeling is that many of you probably feel the same way when it comes to tackling your own master data challenges. But you can't escape the fact that if you don't have a solid foundation of clean, current data, you can't be effective or accurate. So the mutual attitude adjustment starts...  NOW.

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I’m taking a break from the usual this week, and rather than covering a webinar, I’d like to share a new series of YouTube videos with you. Don’t get your hopes up – there are no home movies of cute cats falling down stairs or into grocery bags. Instead, I’d like to introduce you to a series of 5-7 minute videos made by Dr. Jim Anderson of Blue Elephant Consulting, and the writer of “The Accidental Negotiator” blog.

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This week's Wiki-Wednesday topic is CAPEX (Capital Expenditures) v. OPEX (Operating Expenditures). Once you understand the difference between them, the next step is realizing the impact that distinction has on negotiated savings recognition.

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This week's Wiki-Wednesday topic is the Pareto Principle - also known as the 80/20 rule. Many of us use it all of the time, but do we really understand the implications of the distribution principle? I'm sure I hadn't fully thought about it until reading up for this weeks' posting. Other things I did not know about the primciple are that it was incorrectly attributed to early 20th century economist Vilfredo Pareto because he observed that 20 percent of the landowners in Italy owned 80% of the land. (He also noted that 20% of the pea plants in his garden produced 80% of the peas...)

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