Influencing and Sourcing Nontraditional Spend CategoriesPosted: May 10, 2012
In their highly strategic session on the final day of the Conference, “Influencing and Sourcing Nontraditional Spend Categories,” Boston-Scientific Corporation Vice President, Global Sourcing Karen Weinstein and Tim Dolan, director of indirect procurement, global sourcing, began by sharing a tried-and-true axiom: You can’t improve what you don’t measure.
And at Boston-Scientific, they measure quite a bit ─ and the data is uncovers are crucial to the indirect procurement team gaining access to and influencing more than US$1.5 spend in nontraditional categories. These range from office supplies, to travel, to legal services.
At Weinstein and Dolan’s organization, this means overcoming some typical arguments for lockout from difficult-to-access spend categories:
- “You don’t understand our business.”
- “We already negotiate hard.”
- “Our business is too complex.”
As Dolan explained, the only way to combat such apprehension is by actually knowing these business units’ business. While this strategy has paid off for him and his team at Boston-Scientific, it required a purposeful, strategic roadmap.
And, it didn’t happen overnight; this access has taken more than a decade to obtain.
Before 2000, indirect procurement at the company was largely a tactical, order-taking/order-placing process.
Between 2000 and 2005, the indirect procurement function began focusing on price negotiations, resulting in cost savings between US$3 million and $9 million.
From 2005 to 2009, the team began implementing strategic sourcing initiatives, such as spend cost analytics, supplier rationalization, category teams and more. It paid off to the tune of $11 million to $17 million in cost savings.
Beginning in 2010, the indirect sourcing team focused on value creation, including category management ─ nontraditional spend categories among them ─ for a cost savings of $17 million to $19 million.
Whereas survey data shows only about 30 percent of procurement organizations get involved in legal spend at their companies, Boston-Scientific is ahead of the curve. There, a legal sourcing lead is in place. This individual has no legal background but is, according to Dolan, “smart and motivated,” which has proven adequate.
For Weinstein and Dolan, the optimal level of indirect procurement’s involvement in nontraditional categories is 75 percent. Right now, it hovers around 50 percent. To reach the desired level, they will continue to use, and improve on, seven influence levers: empowerment, interpersonal awareness, relationship building, common vision, organizational awareness, impact management and local persuasion. As Dolan pointed out, different levers resonate with different business unit leaders; so, they don’t use all of them at once.
To further keep the access momentum going, Weinstein and Dolan use a four-pronged approach. This is comprised of category business planning; constant measurement (especially in the areas of savings and avoidance); rewards and recognition; and building the pipeline – ensuring it’s populated by candidate projects, active projects and completed projects.