Being an avid fly fisherman it is amazing to me the lessons I’ve learned in entomology. To be a good fly angler you must first understand the environment of the trout’s main source of food, bugs.
Mother Nature and her vast world of bugs creates feeding opportunities that, when replicated correctly, can enable the angler "big catch" opportunities. As critical as understanding entomology for the fisherman, understanding the current business climate is as paramount to create success for the procurement professional. Envisioning a situation that intersects proper planning with opportunity is what creates success. For the angler, "matching the hatch" will determine success. Just as timing the market, for the procurement executive, will create "big catch" savings opportunities.
Matching the Hatch
One important technique of fly-fishing is called, "Match the Hatch". As an angler learns, most bugs lay eggs in water. As the eggs begin to hatch, the larva emerges and floats to the water’s surface where they dry their wings and prepare to fly away. Trout have learned to identify such feeding situations and will opportunistically feed at the time of the hatch. Skilled fly anglers must determine what bug hatch is occurring, match the fly to the hatching bugs and entice the trout to strike. Hence the expression; Match the Hatch. A skilled procurement professional must use similar techniques in determining what business trends are hatching and what data elements need to be considered to create a category "catching" opportunity.
Like the fisherman, procurement professionals are often challenged by indirect services procurement as to where to begin to catch the best and biggest opportunity. The daunting task of category prioritization, change management, internal and external adoption and meaningful ROI all must be looked at before setting out a solid strategy. Like any good fishing report that gives us insight as where the fish are biting, knowing what categories can create the best rate of return is often the best place to start.
Weather forecasts, environmental trends and other factors are also important in fishing and procurement strategies. Earlier this year HCMWorks published the results of our annual Indirect Procurement Survey. This survey found that 79% of the respondents identified Indirect Services Expenditures as the Greatest Area of Meaningful Corporate Savings Opportunity. Download a copy of the Survey results here.
Clearly this is a strong signal that indirect spend management continues to be a great opportunity for any procurement department to aggressively pursue. But, where to start? In staying with our fishing analogy, what’s biting, and what flies/bait are they biting on?
HCMWorks leverages a series of proprietary tools to take our clients through a process that helps them determine how to force-rank their categories for deployment. The use of critical decision filtering matrices helps procurement professionals determine where best to spend their time. What part of the river is catching fish…. However, this doesn’t happen until there has been an in-depth analysis of the spend data aligned together with other critical business aspects for complete consideration. When procurement executives were polled, the categories represented below, reported where many corporations were focusing their energies and resources.
While Travel and Telecom scored above the 80% mark, categories like, Print, IT, Labor, Shipping/Logistics and Office Supplies all came in over 70% as being Likely to Very Likely an area of meaningful indirect expenditures savings opportunity. Seeing how 11 of the 13 categories all scored greater than 50% on the scale indicating real savings opportunities, what continues to be surprising is why more companies have not assembled a unified comprehensive strategy to attack these savings opportunities. If the fish are biting…why aren’t more companies fishing?
HCMWorks typically encounters the following reasons why companies are not taking a more aggressive approach to indirect services expenditures:
Fragmented buyer base
Difficult to transactionally manage (no comprehensive systems – too many point/niche solutions)
No detailed, real time visibility
Big change management issues
Not properly staffed to ensure adoption & sustainability post sourcing
Focused on direct materials & services
No internal expertise
No executive sponsorship
In spite of all these obstacles, Everest Reports, that on average, 17% hard dollar savings opportunities with indirect services procurement and greater when an Managed Services Provider (MSP)/Business Process Outsourcer (BPO) are engaged post rationalization and sourcing.
When to Fish with a Guide?
When I was considering moving from traditional spincasting rods to fly rods, the differences between the two was very overwhelming. Even when I took the time to read and study about the different nuances to fly fishing and fly tying, I found myself intimidated to venture into the very different and artistic approach to the sport. I didn’t know where to go or where to start…
So, how did I get over my intimidation? I found a guide. I identified an expert, someone who had been doing this for a long time, that has leaned from past mistakes and could help me get on the right track to overcoming my fears and venturing out into something I knew could be rewarding.
This is very analogous to identifying a neutral MSP/BPO [for more on neutral MSPs see our white paper at, http://www.hcmworks.com/white-papers/2009/03/the-value-of-truly-vendor-neutral-managed-service-programs/] market leader who can guide your organization in how best to approach its indirect services procurement. Each fishing area is different, and like a good guide, a solid MSP/BPO expert will help your company create a strong indirect program through:
Analysis (Opportunity Evaluation)
Strategy (Best Practices)
A good guide never fishes while guiding, this is why HCMWorks is so adamant about advising our clients against selecting a company who has an interest in the fulfillment of the service but rather choose an advisor who is directly aligned with your company’s program savings and process goals. A fishmonger wants the fish a guide wants you to catch fish.
In starting with a guide to assist me in planning out my trips, I have been far more successful than going it alone. With unlimited time and resources, anything can be figured out, however, that’s not reality in business. Though the experiences a guide provides has given me the confidence to expand my trips to include such esteemed rivers as the Madison River in Montana, South Platte in Colorado, the AuSable River in New York’s Adirondacks and the Chattahoochee River where I live in Georgia. I didn’t try and fish all of them at once and often used similar basic techniques each time. However, each river and fish species is like an indirect category, unique in its’ own right but all conquerable using the right approach.
Not to over simplify, but approaching indirect procurement services is just about "Getting it Done". Intimidation and uncertainty can create a paralytic environment. Be empowered. If fish are analogous to categories then, plan where you want to fish and what kind of fish you want to catch. Determine where the fish are and if you can access them. Then, set out with clear goals and enlist the help of a good guide. The results can be that "big catch" or a series of smaller fish that add up to a great day or quarter. The only part of this fishing analogy I have not been able to reconcile is the old fishing expression. "A bad day of fishing is better than a good day at work." I’m still working on that one.