In my last two posts on this subject (Part I, Part II) I wrote about how the majority of cost reduction initiatives (up to 66%!) fail, meaning the full savings potential identified is not realized. I also provided some context to the challenges you will encounter during the sourcing process that quite often lead to failure.

The reality is the failure of strategic sourcing initiatives to produce realized cost savings for the organization is not due to the lack of competition, motivated suppliers, or lower prices available in the marketplace. It is not due to the lack of market expertise or the negotiation prowess of the sourcing lead. The primary reason sourcing fails is due to the internal challenge of change management.

Instead of realizing the importance of change management internally, the sourcing lead assumes that the hard part will be finding lower prices. If lower prices are available, then implementing those prices should be a no brainer. But for strategic sourcing to work, the sourcing lead cannot just identify a competitive market landscape and leave it to others within the organization to take the torch and run. Rather, the sourcing lead needs to see the project through to completion, by verifying hard dollars actually reach the bottom line.

To ensure that savings are implemented at the backend of the project, the most important things a sourcing lead needs to do are at the front end of the project. Specifically, the lead needs to develop a detailed plan, engage stakeholders and end-users within the organization, and enlist executive level sponsorship and support of the project. Without taking the time to invest in these three areas at the front end of the project, the chances of a successful engagement are roughly 1 in 3.

Developing the Plan (Including Implementation)
A true strategic sourcing project plan cannot have a single line listing “implementation” as the last step of the project. A sourcing lead needs to plan for implementation at the front end of the initiative to ensure that any issues that could arise are addressed well in advance. Many times implementation issues can be traced back to an overreliance on the supplier to lead and manage the implementation process. This can often happen in a poorly-planned implementation, in which a kickoff meeting is held with the supplier, but not much happens in the way of follow-up. Months go by before the new supplier’s program is properly implemented, if it is ever fully implemented at all. Without a plan that identifies steps, timelines, roles, and responsibilities, implementations can drag on or even fail.

A supplier can likely provide a more detailed implementation plan than you can develop on your own, given their expertise and experience in transitioning accounts away from another vendor. However, this does not exclude you from responsibility during implementation, nor does not preclude you as the sourcing lead to develop your own internal plan, including high level milestones, roles and responsibilities at the front end of the project.

Engage the Stakeholders and Build a Team

A lack of proper planning inherently includes the lack of a dedicated team to carry out the plan. However, even when plans exist, companies often neglect the most important part of planning: assigning staff! Instead of assigning dedicated resources to an implementation, committees are formed to oversee the process. These committee members have other day-to-day responsibilities that can take precedence. Because implementation is not seen as one of their primary responsibilities, the project loses momentum and often stalls.

When forming a team to assist during implementation, it is important that the members of the team are not just helping out in their spare time. They need to be (to some extent) dedicated resources, with specific tasks assigned to them and timelines tied to those tasks. The team should include a person from the procurement team as the project lead, stakeholders within your organization, and members of the supplier staff, to ensure a smooth transition.

Enlisting stakeholder support at the front end of the project all the way through implementation will make them part of the process, not stuck on the outside looking in. As part of the team, stakeholders become invested in the engagement and gain a clear understanding that their needs and concerns are being addressed. This helps ensure that they will be in agreement with the final outcome and support the go forward strategy.

Enlist Executive Level Sponsorship
Along with enlisting stakeholders on the front end, a sourcing lead should also do everything they can to gain the support and sponsorship of someone that can help should problems arise internally, such as a C-level executive or someone at a high enough level that they oversee multiple departments. Companies are always trying to do more with less, and you will often find that getting attention, let alone support, from on high can be a daunting task, particularly in a large company. However, those with oversight into multiple departments can help break down political barriers and attach sound business reasoning to change management decisions. Having these resources available ensures a swift implementation and allows your company to start saving money faster.

While enlisting support from above will help speed things up, there are always proactive measures you can take to avoid the need to use your ace. In my next post, I will cover some of the things you can do during the sourcing process to guarantee the final results are not pushed aside.
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Joe Payne

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