Companies that adopt an aggressive sourcing strategy typically experience sizable savings at the outset. But savings are rarely captured fully or sustainable.

Why? In my experience, companies have been able to figure out how to wring out cost through aggressive sourcing, but they don't change the procurement process. And herein lies the problem.

The best way to insure sustainable savings is to control the procurement process across the enterprise. That means consolidating purchases across business units and regions into one pool with decentralized purchases against enterprise contracts. Having more than one procurement group, coupled with limited controls and accountabilities, lets savings dissipate because in more cases than not, the staff is not implementing these basic guidelines.

A second problem companies face is they lack sourcing expertise. A procurement professional may know how to purchase office furniture or supplies but probably doesn't have the expertise for a major IT sourcing program. Often companies hire consultants to help them make these IT decisions. But what happens after the consultants leave? Too often these people have to make major decisions for which they lack expert knowledge. The people who knew about sourcing office supplies worth a few million dollars a year are now forced to make corporate purchasing decisions potentially worth hundreds of millions of dollars.

To complicate the resource / expertise issue, companies source items in specific spend categories every two years or more. In today's world 24 months can be a lifetime. Markets change in a heartbeat. These category managers are not always aware of cutting edge changes, market movements, pricing, or new products and services because they are not deep specialists or constantly in the market.

To be continued...