CWS 3.0: February 27, 2013

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Procurement: Get Beyond Savings

I am often referred to as “the Procurement Guy.” It makes sense, as I worked for about 16 years in a procurement role and for several years wrote a column for Contingent Workforce Strategies magazine (predecessor of this e-newsletter) called “Ask the Procurement Guy.” However, I feel the moniker leads to some misunderstanding, the greatest being that all I care about is cost savings and the cost-savings objectives of Staffing Industry Analysts’ buyer clients.

Cost savings and the many ways companies can arrive at sensible cost savings are a creative endeavor to me. Anyone can simply hammer margins, but the art is in developing pricing schemes and incentives that benefit both buyers and suppliers. But to reach an evolved understanding of this new approach, a few misconceptions need to be busted:

Cost savings is not the value or the objective. Many procurement professionals forget that the purpose of a contingent workforce program is to get the right talent resources at the right time to complete a business task or address an issue. If in the process it is possible to save money as well, all the better. But never forget that in the end the purpose of the shoe company is to make shoes and the making of money is a consequence.

It’s not real unless the finance team says it’s real. Every procurement professional can identify with the periodic project review with the finance team. Not unlike an inquisition, it is at these meetings where the projected savings are matched to what savings have been realized. Considering that often at least 35 percent of a contingent workforce program’s annual performance is based on the levels of realized savings. And sometimes the definition of savings can be challenged before the meetings are through. What many suppliers forget is that they can talk about value to the customer all day long but if what you are calling value doesn’t translate to same in these meetings, then it’s all for naught. So make sure your suppliers and you are aligned in what will be considered savings. Better yet, make sure it’s a defined term in your contracts to eliminate any doubt.

A great contract is second to adoption. You may have negotiated the most amazing contract ever, but if your program is not used and relied on by your customers, then by definition you have failed. That is why I always recommend a singular focus on adoption as a critical path for any program to be successful.

Every program is different and has its own unique selling points. But by making sure you understand what’s important and what’s not then you can be more sure of your eventual success.

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