By Dr. Tom DePaoli
Cross-functional teams work well for the sourcing of indirect goods and services, but they require good discipline and creativity on the part of the purchasing leader of the team.
Often, the purchasing team leader must spend more time on team building and training than the actual sourcing process! This poses challenges for the purchasing team leader, but it must be done to ensure success.
Who is selected to be on the team is critical, and team members should be stakeholders with a strong degree of commitment to the outcome. The purchasing leader needs to take the time to educate and train the team on the sourcing process and internal purchasing procedures. Sometimes team members have axes to grind or prior war stories about suppliers. Their supplier biases must be dealt with before the process starts.
Start with training the team on internal value stream analysis of the indirect goods or services, basic industry information, preliminary total cost of ownership (TCO), supplier metrics and scorecard, and the disciplined steps in the sourcing process.
Get everyone involved in some task, research or small project, and have them present it to the team. Then achieve strong buy-in on the proposed sourcing criteria metrics from the entire team. In the indirect goods and services area, on time delivery, is often the most important criteria.
Frequently teams want to rush into the sourcing process without adequate background training. Pressure builds to skip so-called unnecessary steps in the sourcing process and get it over with. “We know that already” usually means “We think we know it, but don’t want to do the hard homework on it!” Based on my years of experience in sourcing, skipping a step is a recipe for disaster and almost always picks the exact wrong supplier!
The purchasing leader should get the team’s creative juices going. Make sure the team completely understands how the goods or services are used and actually “walk the process” of the internal supply chain and the administrative burden. In other words, track exactly what happens in every step of the internal supply chain and use any data that you have to reinforce the team’s understanding. Get the benchmarking information that you can. Face the fact that for many indirect goods or services, your paying customers have no interest in how you source them, or care about them, because this is just not critical to them. However, we know that “indirects” can have a strong negative administrative burden impact on you!
Another creative approach is to test the potential new supplier’s relationship and soft skills. Invite them in for interviews and insist that your potential new supplier’s representative come in and discuss their goals, experiences and past successes. A behavior-based interview is a good approach that I have used. Call up fellow purchasing managers (non-competitors recommended) who have them for a supplier, and ask about their performance and response time in a crisis. Ask point blank if the supplier has done any improvements or cost saving projects.
Finally make sure you visit the finalist supplier’s sites and have them explain their own internal supply chain for the indirect goods. When the supplier is selected do not neglect to have a kickoff. Following these guidelines will help you select the best of the best suppliers for indirect goods and services.