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Handbook – Managing Indirect Spend

Managing Indirect Spend: Enhancing Profitability through Strategic Sourcing

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Subject Matter Experts Joe Payne and William R. Dorn, Jr. at Source One have authored a book to give a concise overview of the theory and practice of strategic sourcing principles.The book Managing Indirect Spend: Enhancing Profitability through Strategic Sourcing was released on October 19, 2011, by publisher John Wiley & Sons. It is currently available for order at Amazon.com.

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The book offers something of value to newcomers to strategic sourcing, as well as seasoned professionals.? Those new to the discipline will find a plain-language guide to the process from start to finish.? More experiences readers will find detailed examples of specific case studies and applications, with practical tips on how to approach challenging sourcing situations.

The book is divided into four parts. Part one focuses on the theory of the process, and covers all the aspects important to keep in mind while designing a strategic sourcing project. Part two reviews the available tools, with discussions about their practical application. While theory is all well and good, most projects don’t progress in a straightforward, check-off-the-box fashion.
Part three tells the tales from the trenches, and how to handle unforeseen problems.
Part four finishes the book with step-by-step instructions on how to construct and implement strategic sourcing projects for specific indirect spend categories.

The contents of the book give a good overview of the type of information that a reader can expect to encounter.

Part One: The Process

Part Two: The Tools

Part Three: Examples from the Field

Part Four: How to Do It


About the Authors:

Joe Payne

As Vice President of Professional Services?for?Source One Management Services, Joe works with mid-market and Fortune 1000 companies to reduce procurement costs utilizing a set of?strategic sourcing processes?that he has perfected over time. Joe manages and leads a team of consultants including project managers and analysts who oversee projects from start to finish, including?analyzing spend, researching process changes, interviewing suppliers, planning, executing, and finalizing?negotiation of new contracts, implementing changes and monitoring new client/supplier relationships. Joe is personally responsible for delivering billions of hard-dollar savings to Source One’s clients.

During his career with Source One, Joe has developed insight into the challenges organizations face when undertaking initiatives to reduce costs in the area of indirect spend. While looking at the consulting market and existing printed publications, he identified a gap in this critical component of business and created the idea for this book.

Joe is a longstanding contributor to the?Strategic Sourceror?procurement blog and news outlet and has led discussion groups and brainstorming sessions at various training seminars and networking events. Prior to Source One, Joe worked as an analyst for Accenture.

Joe holds a Bachelors of Science Degree in Operations and Information Management from the University of Scranton.

William Dorn

As Vice President of Operations for?Source One Management Services, William manages the organization’s daily activities including the H.R., I.T., R&D,?and Finance departments. Additionally, he leads the sourcing initiatives of highly technical spend categories.

William created and manages the development of WhyAbe, the world’s only free electronic sourcing tools website. He also is the developer, administrator and frequent contributor to the “Strategic Sourceror” blog. William has been a guest speaker and presenter at various international trade events and conferences.

William joined Source One in 2003 as Director of M.I.S., before moving into the more encompassing role of Director of Operations. Immediately prior to Source One, William spent a year consulting with a startup firm, Fortera, in which his primary roles were to assist the United States Department of Defense in developing best practices in the acquisition of commercial-off-the-shelf (COTS) software and also acted as Project Manager for the American Institute of Certified Public Accountants’ (AICPA) transition of paper-based CPA exams to electronically administered exams. William started his career as a draftsperson designing industrial compressor components for Compressor Products International (formerly a Division of Goodrich and then EnPro Industries). His career evolved over the course of almost a decade through various positions including Mechanical Engineer, Manufacturing Supervisor, Quality Assurance Manager and ultimately as Process Engineer supporting multiple locations on a corporate level. As a Process Engineer, William specialized in the implementation of manufacturing ERP systems and utilized his Six Sigma background to define and implement cost reduction programs in all aspects of business; from order entry to manufacturing to product shipment.

William holds a Bachelors of Science Degree in?Information Technology, an Associates of Arts Degree in Electronics & Engineering and is a certified Six Sigma Black Belt.

About the Contributors:?

David Pastore

As Director?at?Source One Management Services,?David leverages his experience in the marketplace to help his clients stay at the forefront of technological evolution, maintain clean and optimized networks, and negotiate contracts that save the client money while maximizing their agility in a today’s dynamic business environment. David consults with clients in a variety of industries to identify their unique requirements and develop a strategic plan. Supported by his team of analysts, his projects are undertaken with a holistic perspective of the client’s infrastructure and plan and are designed to ensure the client reaches its financial and operational objectives.

Prior to Source One, David worked as an analyst for Paragon Computer Professionals. He holds a Bachelors of Science Degree in Management Information Systems from Lock Haven University of Pennsylvania.

Kathleen Jordan (Daly)

As an Associate Director?for?Source One Management Services, Kathleen works closely with internal resources to execute sourcing strategies and identify process improvements and cost reduction opportunities in various spend categories. Kathleen’s main responsibilities are the development and implementation of Best-In-Class agreements for Source One clients through extensive research, detailed spend analysis, supplier negotiations, and change management. Her sourcing efforts have delivered savings in several categories, particularly?marketing services,?office supplies, and?facilities management services.

Kathleen holds a Bachelor’s of Science Degree in?Marketing and a concentration in Management from the University of Scranton. Kathleen also contributes to the “Strategic Sourceror” blog where she connects her sourcing experiences with current events.

Jennifer Ulrich

As an Associate Director at?Source One Management Services, Jennifer collaborates with internal resources, suppliers and customers to streamline operations, reduce costs and create value. Jennifer has delivered significant hard dollar savings in multiple categories including janitorial services,?office supplies,?courier services?and?MRO. Jennifer dedicates her time to nurturing?supplier & end-user relationships, working on strategic sourcing projects and ensuring success of those projects through the proper implementation processes.

Jennifer is a regular contributor to the “Strategic Sourceror” blog and has a Bachelor’s of Science Degree in Marketing and a Master’s of Business Administration from the University of Phoenix.

The Source One Team

The Source One team of Strategic Sourcing Analysts, Category experts, and procurement consultants were a significant driving force in the success of this book, and their collective knowledge and skill fuel Source One’s?procurement and strategic sourcing services business.

Our procurement and strategic sourcing teams are optimized for success; they work in the same small groups for multiple projects so there is no learning curve or group dynamics to overcome, and each person becomes adept at conducting all activities of the?sourcing project lifecycle. All our procurement support?team members, from VP to analyst, support the entire end-to-end strategic sourcing process to ensure consistency across procurement and sourcing projects and engagements. All?our procurement and strategic sourcing?team members?have access to Source One’s proprietary database that can be leveraged for project components such as?custom benchmarking,?spend analysis, and?contract negotiations.

The Source One team member is comprised of professionals with real-world practical experience who also possess degrees in a variety of studies including Finance, Supply Chain Management, Business Administration, International Business, and Management of Information Systems.


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Collaboration is Key to Effective Strategic Sourcing

Excerpt from Managing Indirect Spend:

One stage of the strategic sourcing process that is often overlooked is the project kickoff. Regardless of your role within the organization, it is important to make sure that you are not operating in an isolated bubble. Others should develop an understanding of the goals and objectives of your initiative, from the executive team to end users and many in between…. In many cases, the greatest impediment turns out to be implementing change within the organization. All too often, purchasing or finance teams uncover an opportunity to reduce costs substantially and, naturally, believe that letting the facts speak for themselves is all it takes to make the necessary changes. Change, however, does not come easily, and even with the best business case you will find that having the support of the executive team or other higher-ups within the organization pays off.…

End users and other interested parties should be made aware of the initiative as well…. [E]nd users have a stake in the project, as they are dealing with the day-to-day realities of working with the supply base. Try to form a cross-functional team that includes members of several different departments: finance, purchasing, operations, and other affected parties. Having a cross-functional team allows you to get the perspective of a diverse group within the organization and aids in consensus building as projects move through the sourcing process.

The Focus is on Developing Competence in Indirect Spend Categories (Excerpt)

Many companies still do not apply strategic sourcing techniques to indirect spend categories. Instead, indirect spend is treated as a series of one-off purchases, or is sourced with a simple three-bid strategy with no efforts beyond reviewing the supplier price responses. Typically, with indirect spend, per-item prices are relatively low, the product or service is not crucial to the business, and the overall costs are rarely examined because of the difficulty entailed in gathering meaningful spend and market data. Strategic sourcing allows companies to shift away from thinking about indirect spend in this ad hoc manner, and provides spend visibility, objective decision making, and a project management tool to ensure efficient use of the sourcing team’s time and efforts.

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