Accurate data is crucial for sourcing success even after you've established a baseline. Procurement's efforts to interpret and act upon their data will dictate the strategies they employ to locate and negotiate with suppliers.
A few weeks ago, Source One's Jennifer Ulrich and Nick Harasymczuk joined the Source One podcast to discuss data collection for facilities management spend. This week, they returned to discuss what comes next.
Data is everything when it comes time to identify suppliers. Nick and Jen suggest that this information enables Procurement teams to determine, for example, whether they should expand or consolidate their supply bases. Additionally, it helps point to areas of particular concern.
Don't have time to listen? Here's a transcript of the conversation:
Source One: Hello, and welcome to the Source One podcast. Consider us your source for the latest Procurement, supply chain, and Strategic Sourcing insights anytime, anywhere.
On our last episode, we sat down with Associate Director Jennifer Ulrich and Senior Project Analyst Nick Harasymczuk to discuss the first steps in sourcing facilities maintenance services. Once you’ve collected data and established a baseline, it’s time to go to market.
Today, Nick and Jen return to discuss initiating the sourcing process for this complicated spend category. As you’ll hear, data drives the process and dictates the strategies a company will employ for locating suppliers.
Last time, you both made it clear that companies face serious consequences if they fail to assess their Facilities Management accurately. Let’s get started by discussing some of these, Jen?
Jennifer Ulrich: First, I’ll reiterate that the importance of Facilities Management spend will vary depending on the size, structure, and industry of your company. A company based in manufacturing, for example, will need to pay closer attention than one in the financial industry. That does not mean, however, that anyone can afford to neglect this category. Companies can easily fall into disarray if they let the category go unmanaged for an extended period of time.
They might find that service levels are inconsistent or have decreased over time. They could also find that costs have gone up and are no longer in line with the market based on their business’ growth and scope of work.
Nick Harasymczuk: Speaking of scope of work, it’s also possible that the scope of work will have either reduced or expanded over time without anyone’s knowledge. Inefficiencies in the supply base might also go unnoticed. For example, an organization with multiple locations could discover it’s been leveraging multiple suppliers for the same service.
These are just a few of the issues that can result from neglecting Facilities Management spend. Unfortunately, getting the category organized and developing a program for total management won’t happen overnight. Companies will need to develop a plan of action with clear, logical steps to course correct and recoup lost savings. This process could take years depending on the contracts in place, but it’s impossible to effectively go to market without it.
S1: So, where should companies start?
JU: The first step is always getting organized. Companies need to determine which subcategories need to be reviewed and prioritize their efforts based on the impact specific categories will have on their overall facilities operations. For example, a company might find themselves looking more closely at Security Services, Landscaping, and Waste Management purchases than HVAC Maintenance, Roof Repair, or Janitorial Services.
S1: If a company has let their Facilities Management spend go unreviewed for some time, it’s likely they’d have trouble prioritizing their spend analysis. What factors typically play into this process?
JU: Prioritizing subcategories depends on a number considerations. These include existing contracts and their timeframes, total costs of contracts, criticality to the business (a customer facing category might take precedence, for example), and any concerns over service levels.
Once you’ve developed a plan for tackling crucial categories, you’ll have to collect all the relevant data. That means assessing contracts, pricing agreements, scope of work documentation, and end user feedback. With this data, you’ll be able to prioritize sourcing efforts based on factors like expiration dates. Additionally, this data will provide the basis for a baseline. We all know how important that baseline is for conducting successful initiatives.
S1: And how do these prioritization efforts ultimately affect go-to-market strategy?
NH: An accurate and actionable picture of your company’s needs makes it possible to develop and execute the appropriate sourcing events. Tailoring your methods to the primary drivers within a subcategory promotes greater efficiency and should produce more useful results.
Maybe you’ve observed that services have become decentralized over time and are spread over multiple suppliers in multiple locations. In this situation, you’ll likely want to focus your strategy on consolidation. Or the opposite might be true. Regardless, you can’t develop strategies or conduct effective events without taking the time to thoroughly assess your spend and determine priorities.
S1: But closing and event and awarding business isn’t the end of an initiative, right?
NH: That’s correct, closing an RFX event is just the beginning of a category management plan. Going forward, the company will need to maintain contracts in a database with automated triggers and manage suppliers through structured SRM programs to ensure compliance with established KPIs. And that’s just the start! Their established plan has to include flexibility to account for the unexpected, and they can’t afford to fall back on old habits.
S1: Maintaining a vigilant eye seems to be key.
JU: Right, no one wants to go through the effort of category cleanup to find themselves doing it all over again next quarter. Compiling accurate data and maintaining efficient supplier relationships are both ongoing processes. If you get lazy, you could wind up facing challenges like the ones we discussed earlier and suffering serious value losses.
S1: Thanks you both.
Next week, Jen and Nick will return to conclude their series. They'll discuss implementing solutions for better management of facilities management spend. While you wait, consider reaching out to Source One's cost reduction experts. They've got decades of experience and unparalleled market intelligence. Whatever your industry, whatever your spend category, count on Source One to produce long-lasting cost savings.