Supply Excellence — Hate to Say, “I Told You So”

Hate to Say, “I Told You So”

May 6th, 2006 · by Tim Minahan · No Comments · best practices, sourcing, supply management

Friesland Food’s approach to technology investments echoes recommendations I would make to enterprises during my analyst career.

Supply management theorists would say that the ideal approach is to supply management improvement is to begin by adopting processes and systems to improve visibility into your company’s supply contracts and spending. And they’d be right — in theory.

Contract management and spending analysis can help identify risks and opportunities for improved spend leverage and compliance, strategic sourcing, and supply base rationalization. (Research studies from Aberdeen Group and AMR Research have documented the benefit of these approaches in detail.) However, required data is hidden in systems and filing cabinets both within and outside the company. And managing change issues across the multiple functions involved in these tasks is never easy – particularly when legal and IT are involved. These factors can conspire to elongate implementation and time-to-value cycles, delaying (or altogether eliminating) opportunities to win early favor with execs and stakeholders.

A more practical (and recommended) approach to supply management improvements is to begin by attacking “low-hanging fruit” opportunities with competitive, strategic sourcing and total cost/best value negotiations. As Friesland found, online sourcing and negotiation tools can help accelerate and increase the benefits of strategic sourcing initiatives, generally delivering double-digit cost reductions, depending upon the category and market factors. Savings are so dramatic that many companies report achieving full ROI on their e-sourcing investments within two to four sourcing projects. More importantly, quick wins afforded by e-sourcing can be leveraged to curry favor both with senior executives and doubtful stakeholders. Many enterprises have taken a similar approach to Friesland, reinvesting some of this early sourcing savings to fund other resources and applications required to drive additional cost, compliance, and supply performance improvements.

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