Managing Indirect Spend: Enhancing Profitability Through Strategic Sourcing

CHAPTER THREE

Conducting Research

ONE OF THE MOST CRITICAL, YET OFTEN OVERLOOKED, steps in any strategic sourcing initiative is conducting research. However, most people think the biggest challenge of research is knowing what to look for, while it is actually equally important to know where to look for information. The research phase of a strategic sourcing initiative requires both creative, out-of-the-box thinking and business acumen. Its purpose is to use the information analyzed during the data collection phase to begin developing market intelligence, which means identifying potential opportunities for cost reduction.

TYPES OF COST-SAVINGS OPPORTUNITIES

Cost-savings opportunities come in three forms—leveraging opportunities, process improvements, and product or service changes.

The most common type of cost-savings opportunity is the leveraging opportunity. Leveraging opportunities are created by using information to achieve a lower net price for the product or service being purchased; either through a negotiation with the current supplier or a transition to a new supplier. Often this includes gathering intelligence that relates to the price of a product or service by identifying alternate suppliers and soliciting pricing proposals. The goal is to leverage the information you have acquired in the data collection phase in order to drive the supply base to provide a better price, product, or level of service than would normally be offered to an uninformed client.

It is important ...