FACT 1: To succeed in managing services spend, companies need a consistent approach and vision -aligned with the business strategy. They need robust back office support processes to understand and analyze what is being purchased and from whom. Visibility of services spend multiplies the company's capacity to move with speed, drive compliance, mitigate risk, improve supplier quality, and leverage value.
You're not likely to find one Chief Procurement Officer that will disagree with that statement. However, stating it and achieving it are different matters. Due to increased workloads and competing priorities, the reality of effectively managing services spend may seem unattainable and that's assuming that procurement even has visibility of the services spend across the enterprise.
It is common for the engagement of service providers to be handled by individual business units – where each business unit may have relationships with different vendors. Case in point: Once an SOW contract is signed, the procurement function typically goes away, and then the business units are on their own to manage the execution of the project, including all of the approvals and payments according to different contractual milestones. The problem with this portrayal is that at an enterprise level many organizations lack an overall governance structure, and therefore, there is extremely limited capability to measure and monitor the spending and supply chain risks. In addition, even the most basic information - like SOW volume, and general scope of work - is extremely challenging to quantify.
Assembling detailed SOW information is often difficult or in some cases out of the question. Forget the hard questions. And, definitely forget forecasting. If you think that costs are an increasing concern, you'd be correct. But, the bigger near-term challenge is around compliance – and having the capability to answer the most basic questions on services spend.
If you procure a significant volume of services, ensuring that a statement of work (SOW) is provided and in compliance for each engagement may be overwhelming - given the contracting, oversight, and administration required.
Do you know:
How many suppliers and statements of work your procurement team is managing monthly? Whether rates are competitive and project deliverables are clearly outlined for each service procured?
If your SOW documentation is standardized and accurately tracked?
How well your services suppliers are performing and how many change orders are occurring due to suppliers not meeting their requirements as set forth in the SOW?
If you can't honestly answer 'yes' to the questions above, fact is you may need to seek support from an outsourced procurement partner for the administration lifecycle of your SOWs.
FICTION: My organization will never approve outsourcing of procurement-related tasks.
Industry research studies for 2016 predict a continued uptick in outsourced procurement tasks, to allow organizations to drive consistent processes, realize cost savings and more importantly extend their network of expertise while focusing on core category strategies and competencies in-house.
SIA cites the use of project-based SOW-based workers will continue to grow as part of the organizations' workforce mix. Statement of Work Management is one of those functions that procurement organizations are increasingly willing to leverage competent service partners.
So, what does a comprehensive SOW management solution look like? To maximize the value of an outsourced arrangement, look for a partner that provides the following:
Consistent SOW compliance and validation
Process discipline and governance
SOW life cycle administration and management
Milestone/deliverable approval adherence and management
SOW change order management
Reporting and data analytics
Supplier score-carding that leads to rationalization and optimization strategies
Visibility to detailed SOW data
Cost saving methodologies that deliver hard and soft dollar savings
Services procurement category expertise
In earnest, there is no magic bullet, and this work is much easier said than done. Impactful change will not show up overnight. Gaining management oversight is a journey of moving to a structured process with the right tools, procedures, governance, and as necessary, provider partners to first achieve visibility and ultimately, vision.
FACT 2: Einstein said, "Insanity is doing the same thing over and over and expecting different results." Actually, there is no clear evidence that Einstein made this comment, but who cares the statement still has merit. This brings us full circle back to Fact #1 cited earlier.
What are you going to do differently to ensure your success managing services spend and to make that fact a reality?
Barbara Lauer is Director of Services Procurement for the Contingent Workforce Solutions team of KellyOCG. She consults with clients across the globe to help them improve management of their Statement of Work (SOW) spend through process, supplier and rate optimization. Barb is a Subject Matter Expert in the management and sourcing of service providers and is responsible for the architecture and solutions design, implementation, delivery and overall customer satisfaction of Statement of Work (SOW) and RFX management solutions aligned with client's business strategy. Ms. Lauer has more than 20 years of procurement experience having worked in positions of increasing responsibility managing both direct and indirect categories within the Automotive, Consumer Products and Manufacturing industries. She has set strategies and purchased across the following indirect categories: contingent labor, consulting, professional services, manufacturing services, capital projects, MRO, travel and training. Barbara was named a 2014 “Pro to Know” by Supply & Demand Chain Executive magazine.