Supply Excellence — Mid-Market: Treading (procurement) water

Mid-Market: Treading (procurement) water

June 26th, 2008 · by Paul Tong · No Comments · events, mid-market/growing enterprise, sourcing

I posted here recently about a webinar I was presenting with Purchasing.com’s editor-in-chief and a panel of 3 D & C-level procurement professionals from mid-sized companies (the replay is available here if you’d like to check it out). The discussion ranged from spend management approaches to organizational challenges. But one of the most interesting takeaways was around the very ‘process’ oriented role procurement plays in the mid-market, especially when you compare it to their more strategic focus of their counterparts in the Fortune 500.

Based on the panelists and the audience polling, it’s safe to say that mid-market sourcing departments are doing a decent job at keeping their heads above water. For example, 72% of the webcast audience felt they were “effective at sourcing goods and services through preferred suppliers.” While it’s great they’re meeting that need, the fact that only 30% of them felt they “could provide forward visibility into spend” speaks volumes about where they are coming up short.

Without good data coming from the procurement department - what’s being spent, with who, from which location - their ability to influence decisions and a build a bridge to finance is lost. Instead they’ll be relegated to processing orders and if they’re lucky … controlling some spend on direct materials. But given the the challenging market conditions for direct materials, the major savings opportunities right now are in services, indirect materials, T&E and other areas with less direct correlation to commodity prices.

There are a broad range of contributing factors; lack of executive support, tight departmental budget, little or no technology, and an overall focus on ‘putting out fires.’ But even in the mid-market, it’s possible to raise the bar and expand the strategic role of procurement in driving savings and minimize risks (supply chain interruptions, product safety, financial, etc.).

For example, Waters Corp has moved from a departmental approach to a global, holistic view of procurement that is managing both direct and indirect spend. Considering their Global Sourcing Director, Tom Wesley, described their earlier approach as a naive “fat, dumb and happy approach to spend management,” their shift towards a more strategic role required some major shifts in process and culture. But Wesley credits this new strategic role with helping the company weather cost pressures and competition.

Paul Tong is a Senior Marketing Manager in Ariba’s Growing Enterprise group.

Email Forward & Bookmarks