Intermediate Sourcing: Stuck in the Middle?

Lack of an undifferentiated approach towards these projects is analogous to middle child syndrome in psychology

Mayank Saxena
Mayank Saxena

One fine day, a client stakeholder from the procurement team came up to me and said, “We are so damn slow! Why does it take us two to three months to close the sourcing process for $1 million software? Can we do something to improve our turnaround times?” I said “Look, it is not $200K that you are talking about. It is more than a million.” She sprang back immediately and said “So what? I have 10 such things going on simultaneously!”

Once this conversation was over, I looked at our spend data and project tracker. Indeed, there were more than 10 projects on there with spend between $1 and $2 million with varying degrees of complexity and urgency. They didn’t warrant the attention of the category manager, but couldn’t be passed along to our dedicated Tail Spend Team as well. For lack of better words, they were intermediate sourcing projects. Lack of an undifferentiated approach towards these projects is somewhat analogous to the concept of middle child syndrome in psychology.

A key feature of such projects are that they are low to medium in terms of strategic complexity and have medium to high spend. While spend is self-explanatory, strategic complexity is a combination of two factors—the strategic impact of the project and the sourcing complexity of the project. In the graphs above, cells shaded in yellow indicate areas/projects that may be classified as intermediate.

How do we deal with such intermediate sourcing projects and, most importantly, how do we turn them around quicker? A spot buy request takes three days, and an advanced strategic sourcing project takes three months or more. What about something in between? How do we handle them with adequate care, but within a shorter timeframe?

  • Templates. Have templates ready for data collection, request for proposal (RFP) cover documents, supplier questionnaires, pricing worksheets, response scoring and even executive presentations. Most of the work that I do is information technology (IT) and telecom, and we primarily have four subcategories: software, services, hardware and telecom. We have a subcategory-specific template available for each activity and it really helps save a lot of time.
  • End user education. It helps a lot if your end users are aware of the RFP process, know when to engage procurement teams, and come prepared with basic groundwork on requirements, timelines, etc. We have a few stakeholders who engage us up front, and come to us with not only crisp and clear requirements, but also 80 percent of the supplier questionnaire. However, end-user education doesn’t come free. A procurement organization needs to invest in training its end customers and, trust me, it is well worth the money!
  • RFP design. Ensure that your RFP gives out as much information as possible about your product/service requirements. More clarity ensures fewer questions from suppliers, less overhead and hence quicker turnaround times. If you have a standard contract template, share it along with the RFP, so that the supplier legal team can start work on it right away. In my experience, last-minute scope changes lead to significant back and forth, especially on the pricing front. Therefore, it may make sense to call for modular pricing when it’s easy to pick and choose the product and services that you want, and arrive at the price immediately rather than exchange 10 emails with the supplier about various combinations of products. Ask for a statement of work (SoW) from suppliers. It helps a lot!
  • Stay ahead of the process. A key element of intermediate projects is that they are predictable. There are few surprises if any. Therefore, it’s easy to save time by staying ahead of the curve. For instance, get a sense of which suppliers are emerging as strong contenders and start negotiations with them early on in the process. If you have a well-defined budget and target pricing available, share it with the suppliers as early as possible.
  • Track and measure. What cannot be measured cannot be improved! So, track the number of intermediate sourcing projects, the turnaround times and resource utilization for each project. Once you have the data, look it up for insights to improve your processes.

Using some of the abovementioned mechanisms, you can fuel up your RFP factory. However, a word of caution over here: One must be careful about assessing project requirements and identifying the right sourcing approach for the same. The principles of intermediate sourcing are applicable to only a small subset of all sourcing projects. A quick cheat sheet of criteria to determine if a given project is intermediate is below:

  • Requirements are crisp and clear. Business stakeholders know exactly what they want.
  • The procurement team sourced that item or category multiple times.
  • Spend is above the tail spend management threshold.
  • Project visibility is at best moderate in terms of organizational impact and supplier relationship.

You would be surprised to know that there are so many negative connotations associated with the word middle. Hopefully, with some attention and care, we can ensure that the middle child of procurement does not land up in the middle of nowhere!

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