See the Forrest for the Trees: Investing in Short-term Low ROI Activities for Long-term Dividends

One of the common challenges we see when partnering with clients is how often their approach to strategic sourcing is compromised by staffing limitations and management of priorities. Specifically, without resources available to focus on manage spend in a truly strategic fashion, it is often necessary to "keep the lights on" and compromise their ability to optimize spend and their supplier relationships. To be clear, it's not always because opportunities are not identified, it's because they have a roadmap and a team assigned with sourcing and other objectives clearly defined and prioritized and once that's carved into stone they simply lack the flexibility at any point in time to take a step back and look at the big picture. Most frustratingly, this can be how some of the biggest risks can be managed and the biggest opportunities can be discovered.

Let's consider an example in the telecommunications category. In most cases, barring acquisition activity, the majority of telecom spend falls to one or a few suppliers for each of wireline and wireless. That means, these categories tend to be looked at from a 30,000 foot view when slotted into a roadmap with the driving factor being the answer to, "Do we need to negotiate or source this category this year?" The answer often comes from a quick look at the contract and the run rate vs. the volume commitment and that decides it. The problem is that two out of three years the answer arrived at will be, "No." And, after all, if there is no sourcing or negotiation to be done, what value can Procurement bring to the table in that category besides jumping in to support tactical and one-off needs during the term of the contract? It turns out a lot. And involvement during those "off" years could pay extraordinary dividends to the years when the answer to that question is "Yes."

For this category and so many others, the behaviors and contractual obligations resulting from day to day management of a category are what set the stage for exceptional results or can largely diminish the results to be expected from broader strategic sourcing efforts. The reason this challenge seems to be so common is not because it’s not known to Procurement leaders, it’s that they lack the flexibility, scalability, and agility with their team to address these concerns. They’re too unpredictable to reliably factor into a roadmap and most Procurement leaders tend to head toward to knowns that will drive toward their spend under management and cost reduction objectives leaving little or no room to address day to day changes.

This is just one reason why many companies rely on third party support like Corcentric provides. Having an on-demand team to draw from provides more flexibility to assign the right internal and third party resources to the right projects and activities at the right times to optimize spend under management. It’s not the only solution, but it’s often the shortest and lowest risk path to discerning which categories or spends should be hedged more conservatively to allow for some agility to manage the day to day. This conclusion is drawn from the upside realized from broader strategic sourcing efforts for the category vs. perhaps the more tactical spends that would have taken up that resource time. This is an area of untapped potential for many Procurement organizations due to the pressure placed upon them to maximize their metrics with the resource they have. The variability and unknowns associated with applying more resource to day to day category management without an immediate ROI is just too high risk. Consider ways you can close this gap within your own team and don’t rule out bringing in additional support to simplify the process, reduce risk, and maximize results.