By Susan Avery
Joe Payne and William Dorn of Source One Management Services know strategic sourcing. They know indirect. And they know purchasing professionals.
“I don’t think people are aware of the pressure that’s put on procurement and finance groups to cut costs and to streamline supply chains when they don’t have the manpower, time or access to information they need,” says Dorn, director of operations at Source One, a provider of procurement services in Willow Grove, Pa.
Dorn, with Payne, who is director of strategic sourcing, are authors of a new book, Managing Indirect Spend: Enhancing Profitability through Strategic Sourcing. The two spoke about their endeavor recently with My Purchasing Center.
While Payne and Dorn wrote the book for purchasing professionals who manage indirect spend categories such as MRO (Maintenance, Repair, Operations), telecom, office supplies and services, among others, they also see it as a source for those who don’t have a procurement background and are given responsibility for cost reduction.
“At Source One, we are usually brought in by the CEO or CFO, someone who doesn’t have responsibility for sourcing and doesn’t know where to start or how to move ahead with a cost-reduction initiative,” says Dorn. The two wrote the book, with help from colleagues, based on their experience at Source One.
The 446-page book covers Managing Indirect Spend in four parts: The process (i.e., collecting data, conducting research, the RFx process, negotiations, implementation and continuous improvement, etc.), the tools, examples from the field, and how to do it. An introduction describes what is indirect spend and how one manages it.
“A large portion of our book focuses on the fact that what many people think is strategic sourcing really is not,” says Dorn. “Many people think developing an RFP (Request for Proposal) and getting three bids is strategic sourcing. It is not.”
The two authors carry the theme on what strategic sourcing is not through the book, including to a chapter on scorecarding. They say that in their experience they’ve seen a lot of scorecards and sometimes are asked simply to evaluate scorecards.
“We try to refocus on what is really important with scorecards,” says Dorn. “Many companies use criteria to disqualify suppliers without any really good reason behind it,” such as the time a company has been in business or whether it received a specific award.
“The idea of scorecarding is to inspire competition among suppliers,” Dorn says, explaining that companies need to dig deep and think about why questions are being asked and what the answers should be.
And for those new to indirect or struggling to manage the category, Payne offers this advice: “Make sure you have executive sponsorship, someone who is on board with the program and there to back you up when you hit a roadblock,” he says. “And, at the same time, seek out end users, stakeholders and people who work with suppliers daily and include them in the process from the beginning. They will be less reluctant to change.”
For more information on the book, Managing Indirect Spend: Enhancing Profitability through Strategic Sourcing, please go to: http://www.strategicsourcingbook.com/
Susan Avery is Editor-in-Chief at My Purchasing Center. She writes articles, blogs and white papers and manages and creates other content for the online procurement and supply management publication. She produces and moderates roundtable discussions, podcasts, webcasts and video interviews. Susan has 30 years experience covering procurement and supply management for Purchasing magazine and Purchasing.com.
George E. Krauter
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