For most procurement teams, speed to savings is critical. And, crossing the metaphorical finish line to savings often requires added resources in the form of a well-oiled procurement machine. While the need for conducting comprehensive, but concise sourcing engagements is crucial the success of a sourcing initiative, companies often face an array of pitfalls that can obstruct the track to savings.
Throughout the sourcing process, there are a number of challenges that can arise to delay the end-user adoption or implementation of cost reduction solutions. In my time as a sourcing professional, I have seen several recurring sourcing process delay points. One of the most frustrating instances is when a stakeholder group explicitly decides to take no action or ignores a request to take action to realize savings – the equivalent to a never-ending red light. This means for a given sourcing event or direct negotiation, savings have been identified, but the decision maker for the given category will not move on the savings opportunity in a timely manner. This can be extremely painful for procurement professionals as we get to watch other cars on the road driver merrily on their way while we have to stick it out waiting (hopefully) for our turn to go. Another common delay in speed to savings is contract negotiations. Often we will see seemingly simple, straightforward sourcing events get delayed or even derailed during the contract negotiation process between legal and commercial teams. These two specific instances of savings delays risk the magnitude and speed to saving your company money.
The most obvious risk by not accepting a proposal in a timely manner is the possibility of losing the savings opportunity altogether – AKA damaging your procurement vehicle. Though sometimes it’s a matter of fixing a flat tire and regaining momentum on the sourcing track, for others not acting promptly means totaling the vehicle altogether. Many vendor proposals are time sensitive, the typical proposal guarantee from a vendor is 30 days from proposal submission. I have seen decision teams unable to come to a consensus and see savings from a well-run sourcing event slip through their grasp. Another, somewhat related, risk is when there is an extended period of time proposal submission and contract execution, while vendors may agree to extend their proposal validity date, the longer a team takes to sign on the dotted line, the more savings float out the window. These types of delays, in addition to risking the financial benefit of a given sourcing event, also put the quality of the vendor relationship at risk. Luckily, these risks are generally avoidable.
While there is no way to evade Murphy’s Law, “If anything can go wrong, it will,” there are processes you can build into your organization’s sourcing practice to help avoid unnecessary decision-related or negotiation-related delays in the sourcing process. Before going to market, ensure you have identified the decision-making team and discuss their expectations for the sourcing event. Aligning at the outset of an event can go a long way to avoiding selection delays or stakeholder disagreements once proposals have been submitted. Build approval and alignment checkpoints into your sourcing timeline prior to going to market. These will serve as the necessary pit stops that will keep your procurement vehicle well-equipped and on track. Requiring all decision makers to provide sign off before going to market should alleviate some post-event decision issues. So often the reason for a decision delay is because the stakeholder team was not aligned before going to market. To help avoid contract-related delays, start the contract review process with your event solicitation. Clearly outline non-negotiable commercial or legal terms in the event documentation and attach (or request) the relevant contract template with the bid documentation. Coach your supply base that they should have a redlined agreement prepared along with the proposal submission.
There may be no way to ensure strict timeline adherence for a sourcing event, but there are processes your organization can adopt to help mitigate common savings roadway obstacles that can prevent you from crossing the finish line. Identify the decision makers, enforce alignment on any given event amongst the relevant decision makers before going to market, and start the contract process with your bid solicitation with clear expectations.
Let us know how these sourcing tips work out. Happy sourcing!