The Seven Deadly Sins of Strategic Sourcing. Join me in looking at some of the worst mistakes we’ve all made. I’m sure there are more, but these are at the top of my list. So make sure to stay away from committing them at any cost!
Seven Deadly Sins
1. Sourcing Speak
Total Cost of Ownership. Indemnity Clause. Should Cost Models. We tend to forget these aren’t general business terms. So if you want to cause confusion, this is the easiest way. Whenever you can – leave the lingo at home and simplify. Makes it a lot easier when you are pitching an idea
2. Being a Bully
Nobody likes being told what to do, especially when it comes to business decisions their performance will be judged on. Even if you have the power to stop a new supplier from being added, a PO from being created or pulling back on any type of big purchasing decision – it doesn’t give you the right to be a jerk. Use discretion, that’s what it is there for.
3. Overstating Savings Numbers
Be conservative in your estimates or lose all credibility and respect. Nothing is worse than claiming you saved the company millions when it was merely cost avoidance. Or using some bogus baseline. Even if you do and get away with it, I’m sure your business partners will be tracking you down if the finance group goes back and insists on taking it out of their budget. Especially when they didn’t have that much to spend in the first place.
4. Not Understanding Company Culture
I’ve seen it multiple times, and in different organizations. They walk into a company that doesn’t have a strong sourcing team and become blinded by the green pastures of potential. And then as the “new guy” starts suggesting completely re-vamping processes, suppliers selection and getting rid of the CFO’s favorite consultants (unknowingly) . Even suggesting blanket PO’s when it’s the right thing to do, but needs board approval can be a big mistake. Take the time to understand the “how and why” the company got there, before making suggestions on where the company should go.
5. Misinterpreting Spend Data
Numbers don’t lie, but people who don’t understand the difference between cash and accrual based accounting may end up inadvertently doing so. Just because your spend tool says we spent $5M with a supplier last year, doesn’t mean that’s what was budgeted or actually spent. Accruals, late invoice payments and so many other issues can change your spend data – dramatically. So take the time to dig into the details, or lose some credibility.
6. Stealing the Spotlight
Great, you ran an RFP, negotiated the heck out of the contract and hit a home run by saving 1M on the contract. You deserve some credit, but not the entire spotlight. It wasn’t your budget or decision to make (most likely) so think it through before you going around bragging what you’ve done.
7. Bad Contracting
It’s easy to forget, but it is vital to the way we provide value. It’s a way to get rid of underperforming suppliers who are unwilling to address outstanding issues and can be used make sure invoices are submitted on time (and not 6 months late!). Not that every contract should have penalties (aka teeth), but every contract should have teeth. Specifically tied to performance or service level agreements that are tangible and attainable. Otherwise, what are we doing to ensure all of this work for?