We all know that change is inevitable (in the long run) and resisting this is often counter-productive, but we still do it. It’s human nature. I was recently asked to do a talk on this topic from a procurement perspective, I found the research very interesting. I focused on indirect procurement, specifically on tail-spend categories.
In my world (at Prenax), I talk to people all the time who would like to capture and consolidate this type of spend – and to outsource the management of it to save time. But often, the decision is to do nothing, resisting new, better processes and practices. The reason is usually, “well, we’ve always done it this way”. If it’s not broken, don’t fix it…
But... in the world of procurement, wins can be hard to find. Indeed, companies with good procurement teams often dry up the well in terms of wins. Let’s not forget that most of the attention focuses on IT – e.g. the biggest spend in HR is often the HR platform itself. So there is very little time for indirect, tail-spend categories. Yes, in some cases, automating and outsourcing may take some time to setup, but in the long-run, this could streamline the work-force and could help maximise overall profits.
And there is a cross-over to consider. For many in procurement, the job isn’t just about cost. It’s also about risk and delivering value, so there is a bigger picture. There needs to be measurable return on investment (ROI). And nobody wants to waste time managing small value orders and renewals – that’s where outsourcing come in.
We should all (not just procurement) be questioning the way things are done. Simply doing things because that’s the way we’ve always done it is seldom going to give the business an advantage over its competitors. This applies to lots of different categories. More often than not, the outsourceable category is one that has fallen below the radar. So it hasn’t been addressed before by the business. The procurement mind-set applied to this type of disorganised category could very well mean a series easy wins.
When considering change, we all need to weigh up the investment – financial and time vs the ROI, regardless of where we sit in the organisation. But sometimes, we should also consider what happens if we do nothing. If we simply stick to the way things have always been done…. using an axe when a chainsaw (maybe outsourcing) would get the job done faster. It's about working smarter.
Let’s be frank…It's unlikely that anything terrible would happen if a company chose to do nothing about a category that has always been neglected in the past - sticking to the status quo. But there will undoubtedly continue to be inefficiencies, wastage, payments through expenses, lack of control and visibility.
In principle, applying procurement expertise to a category that hasn’t been addressed before means a lot of low-hanging fruit and an easy way to shine. Some of our customers have even won awards by capturing, consolidating and outsourcing a category that was previously invisible. In one instance, the procurement team assumed that the annual spend on external content and memberships was just $180k. After a year of working together, they realised that they were actually spending $5m (and we generated more than $1m savings once the spend had been captured and controlled).
In a world where wins are hard to find adopting better practices can make our procurement partners look good. In the words of Churchill: To improve is to change; to be perfect is to change often.
Or maybe, If it ain’t broke, break it!
