There has been an ongoing discussion in Linked-In about why some procurement saving initiatives or strategic sourcing plans fail to realize the savings they are projected to have. The comments to the questions have revealed a few likely reasons so many projects fail. I work primarily with government agency buying groups, but the following comments pertain to both public and private buyers.
- Many buying groups operate in isolation and are not always aware of the enterprise-wide opportunities and/or mandated vendors.
- Because these groups operate independently, they don’t understand the value of buying from the corporate contract. This may result in buys made to the contracted vendor, but outside the corporate contract, making effective tracking difficult.
- Sometimes the contracted vendor may not have the preferred items and local vendors may provide better or additional services to the customer. If many people are buying outside the strategic supplier, there may be a problem with the supplier and the program should be looked at or possibly an additional supplier should be added to the authorized list.
Several things have to happen to counteract these “Buy Around” behaviors.
- Senior stakeholders have to make sure the buying units understand the importance of the enterprise projects. Making sure that the information filters down from the top to all the buying units can be a challenge. Often a single memo from the top is not enough to get the message out. Some type of an extended Corporate Marketing Campaign may be required.
- They have to adequately market to the enterprise that these contracts exist, that they are mandated for use, what the benefits of using these contracts are, and how much money will be saved by the business/agency.
- Headquarters also has to make sure that the enterprise-wide contracts support the field unit with all the items they require. They have to have both the right items and the right prices to be effective.
- Headquarters can offer to share the savings with the buying units, giving them a percentage of for local use. This can make it worth the trouble for the buying units to change their current buying practices and to take advantage of the enterprise-wide contracts.
If these steps are followed, it will greatly increase the potential to see the projected savings from strategic sourcing become a reality.