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The Shared Services & Outsourcing Network (SSON) has asked me to present the “Top Categories to Source Now” in a webinar next week (details & registration here). As those of you who have seen other iterations of this presentation know, the categories themselves and strategies for approaching them change as market conditions shift. The big change right now is the time frame you have to take advantage of buyer’s market conditions for direct and indirect spend categories. The clock is ticking…
The National Association for Business Economics released results of their economic forecasters survey yesterday, which showed that over 90% believe the recession will end in this year (74% say in Q3 and 19% in Q4). Couple that with forecasts from the Fed and a higher than expected rise in consumer confidence and it seems as though we may finally have a light emerging at the end of the economic tunnel. But, those surveys are still somewhat “touchy feely” and potentially influenced by group-think. What about the hard numbers?
Looking at the NMI and PMI for the US, we’re seeing continued contraction, but at a lower rate.
An even stronger indicator of a looming manufacturing/economic rebound is China’s PMI,which rose 50.1 in April.
The bottom line is, now is the time to act on many direct and indirect categories - before the economy and prices rebound. I’ll cover several of the categories to target in the webinar next week. But the strategic action items for every company, regardless of categories they source, should be:
- Monitor supplier financials closely to identify at-risk suppliers, and take proactive steps to prevent line-down situations.
- Re-prioritize sourcing initiatives and determine roadmap for 2009 - achieving savings early will be critical for success.
- Maximize the first mover’s advantage by tackling as many categories as possible.
- Use price adjustment language in your contracts if you don’t do so already.
- Source now before it is too late!
Pat Furey is a Senior Category Manager in Ariba’s Global Sourcing Organization. Pat leads the team of US based category managers covering direct materials and indirect goods and services.
3 responses so far ↓
1 Jason Mark Anderman // May 28, 2009 at 6:32 am
Pat, what do you think about strategically sourcing legal services? This is a notoriously difficult area as general counsel’s usually leverage their close relationships with CFOs to avoid procurement managing legal spend, and procurement departments often make the mistake of assigning someone without significant legal experience who is often unaware of the unique sourcing issues in the legal field (e.g., you can’t think of a law firm as one company, a law firm is a loose confederation of companies, each individual company being the equity partner and associated attorneys working on that partner’s book of business) or the KPIs that would work best for this area.
Despite these issues, given the enormous reliance on uncapped hourly rate spending for legal services, I think this is an area that procurement departments should really focus on. How do you feel?
2 Patrick Furey // May 28, 2009 at 12:07 pm
Funny you should mention it. I spend around 10 minutes in the webinar discussing opportunities and challenges in sourcing Legal spend. It is indeed a terrific opportunity for savings, although gaining internal stakeholder buy-in can be difficult.
I am going to ping one of my collegues here at Ariba and ask him to jump in on this conversation. Nick Cherrone is one of our Category Managers for Services/Indirect, and he handles most of our Legal projects. This is one of our most active categories right now.
3 Jason Mark Anderman // May 30, 2009 at 5:34 am
Great. I’ve also had some good conversations with Justin Fogarty about Ariba’s efforts in this area. I think Ariba’s focus, on matching software solutions with excellent content, positions the company well to help customers go after this opportunity.
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