Procurement / Strategic Sourcing Consulting

Service description

Procurement consulting analyzes what a business spends and helps it buy more cost-effectively. A consultant classifies spend by category and supplier, finds where purchases can be consolidated or competitively bid, and supports negotiation of new contracts. Strategic sourcing is the structured version of this work, looking at total cost rather than unit price alone.

Common industries

Applies to any business with significant purchased goods or services.

ROI

Often self-funding — identified savings typically exceed the fee — and drops directly to EBITDA.

Benefit

Analyze spend and renegotiate vendor and category contracts to cut cost without cutting quality.

Why get it

Purchased goods and services are often a large cost, and prices drift when contracts renew without a competitive check. An outside view of the spend shows where renegotiation or consolidation can save money.

When you benefit

Often a project for each spend category, repeated as contracts come up for renewal.

What it costs

Typically a project fee.

When you pay

Providers use a fixed project fee, an hourly rate, or a share of the savings they identify. Gain-share arrangements tie the fee to measured results, so agree how savings are defined and verified before work starts.

Other costs

Staff time to pull spend data and run bids, and the costs of switching suppliers, such as onboarding or contract exit charges.

Risks to know

Savings estimates can overstate what is achieved if they ignore switching costs, service levels or contract limits. Switching or squeezing suppliers can hurt quality or reliability. A fee tied to savings can reward a narrow definition of them.

When risks arise

Savings arrive as new contracts take effect, so they trail the engagement. Quality or supply problems from a change tend to appear after the switch, once the new supplier is in service.

The process

The provider collects and cleans spend data, groups it by category and picks the categories with the best savings potential. It builds a sourcing plan, runs a competitive bid or renegotiation and recommends suppliers. The business decides on the awards and signs the contracts.

Your commitment

The business provides purchasing data, such as invoices and a vendor list, along with current contracts and renewal dates. People who use the goods or services take part in setting requirements, and management is ready to change suppliers where the numbers support it.

Documents to gather

• Recent accounts-payable or purchasing data by vendor
• List of vendors with contract terms and renewal dates
• Copies of major supplier contracts
• Specifications or service-level requirements for key purchases

Helpful reading

• Strategic Sourcing - What is Strategic Sourcing — Chartered Institute of Procurement & Supply (CIPS)
• Negotiation Strategy - Procurement Negotiation Guide — Chartered Institute of Procurement & Supply (CIPS)
• Total Cost of Ownership — Chartered Institute of Procurement & Supply (CIPS)