This is an opinion piece written by Rich Ham, CEO of Fine Tune, an auditing solutions provider. Opinions are the author's own.
In a recent meeting with an S&P 500 client of mine, a global procurement leader detailed his company’s frenzied, acquisition-fueled sprint to 11-figure annual revenue. This growth trajectory had left him with a team of indirect expense management professionals buried in new work, with spend-per-buyer closing in on $100 million per year.
"We’ve got no prayer of actually managing this spend in-house," the leader told me. "We’ve got to get creative and align with outside partners."
It’s a common story:
Industry behemoth has grown its top line by $X billion over the last decade through consolidation and a string of acquisitions.
Cost synergies have been central to these consolidation and acquisition activities, yet maximizing these opportunities requires MORE work — benchmarking existing programs, assessing needs of the new combined organization, pulling together myriad agreements, negotiating new consolidated deals, etc.
Acquired entities’ corporate offices have been drastically reduced or eliminated altogether in the pursuit of quick P&L relief. Perhaps a few buyers relocate to survive as the acquired organization is assimilated.
Increased responsibility (and a small portion of acquired resources) has been dumped on procurement with a work-to-resources ratio that amounts to significantly more work per buyer.
It’s easy to empathize with overloaded buyers in this new, ultra-lean procurement era. Buyers may find themselves wondering any or all of the following:
Does leadership not value what I do, or my department’s function in general?
Do they think I’m a superhero?
Are they actually trying to kill me?
The more productive response is to acknowledge that the landscape has changed. And in this changed landscape, the procurement professional must adapt to the new environment, or risk going the way of the dodo bird.
It helps to "buy in."
As a buyer, truly embracing your dramatically increased workload will probably only happen if you come to believe in the overall corporate strategy. So, let’s take a moment to consider the possibility that steadily increased per-buyer workload has evolved for real and valid reasons as opportunities in the outsourced procurement landscape have emerged.
Consider this: According to a recent report from QY Research, "In 2018, the global Procurement Outsourcing market size was $2.82 billion, and it is expected to reach $6.83 billion by the end of 2025, with a [compound annual growth rate] of 11.7% during 2019-2025."
Further, these aren’t all big, broad-based solutions designed to replace entire departments. Per IBISWorld, the space is "highly fragmented," replete with smaller firms servicing "narrow geographic or niche markets."
Full-fledged niche expense management solutions — in the form of firms comprised of industry experts armed with custom software solutions — exist on the market. Buyers everywhere are harvesting these solutions and are projected to do so at a rapidly increasing rate in the years ahead. As they do so, they’re realizing the benefits of true expert-led expense management.
When a deeply-immersed industry insider leads every stage of an expense management process — from data collection and assessment to strategy setting to sourcing and negotiations to implementation to ongoing enforcement and management — two things happen:
Results tend to be better than they would have been through any in-house initiative. (Even if resources were robust enough to attempt such an initiative.)
Allocation of in-house resources gets smarter, with capable and strategic personnel able to work in a more mission-focused manner.
The savviest owners of these third-party solution relationships will make sure their executives know who deserves credit for the results driven by their programs, telling leadership: "I have a strategy for my entire sphere of responsibility, and as such, the results driven by my outsourced solutions ARE my results."
Acknowledging the new reality is not "excuse-making"
Your leadership probably understands that new, dramatically increased per-buyer demands cannot be addressed by simply "rolling up your sleeves" or "digging deep."
If they don’t, something is broken.
It’s likely, though, that leadership is placing these new demands on procurement teams with the expectation that new waves of creative, strategic expense management leaders will emerge. The sorts of expense management professionals who find ways to drive value both via individual contributions to core priorities and via outside-the-box (indeed, frequently outsourced) solutions to secondary and tertiary categories.
As a buyer in this sort of environment, you’ve got a choice:
Not recommended — Despair and/or revolt: "Watch me fail! That’ll show ‘em!"
Recommended — Buy in: "I've got this. Watch me develop new strategies."
These sorts of bought-in procurement leaders will make sober assessments of what they can effectively manage in-house, and then actively seek outsourced assistance with the rest. No reasonable manager will expect any single buyer to be an expert in 20 different categories, nor is this necessary to be effective. The landscape is replete with solutions to save both time and money across the indirect procurement world. An outstanding procurement professional simply needs to gain an understanding of how to use these solutions to drive results.
"We've got to go outside the organization to augment our resources," my S&P 500 client’s procurement chief told me. He's not expecting his team of buyers to work 70-hour weeks — he doesn’t need superheroes.
He’s expecting staff to work smarter, operating in the new, ultra-lean landscape, availing themselves of the resources that landscape provides.
This story was first published in our weekly newsletter, Supply Chain Dive: Procurement. Sign up here.