Strategic Sourcing for indirect materials – items that are necessary for a business to operate but are not used directly in the final product – is a huge focus for many large businesses. There are significant cost savings opportunities in this area of spend by consolidating vendors utilizing national preferred supplier programs. That said, building and managing these programs is not always as straightforward as one may think. Procurement strategies for indirect materials is different from that of direct materials, and typically requires a much more deliberate focus on Change Management. This can be a crucial, make-or-break factor that’ll determine whether a new supplier program will be successful or not.

There are many distinct challenges in the indirect space including lack of data visibility, vast number of suppliers, out-of-control inventory, and rogue spend. These challenges present significant savings opportunities for large organizations, which can be seized by consolidating their supplier base to a short list of preferred suppliers.

The formula is not very complex at surface level: Choose your suppliers, negotiate contracts, and shift spend to those suppliers. The desired outcomes are financial cost savings, improving data visibility for ongoing program management, and improving service levels leading to increased productivity. Sounds Simple… Right?? Well, if it were that simple, there would not be entire teams dedicated to this group of categories.

Where Change Begins

Typically, the bulk of an organization’s efforts tend to be on negotiating purchasing contracts with suppliers. All procurement professionals must be extremely adept at this skill, which requires negotiating great deals with capable, dependable suppliers. Unfortunately, once the contract is signed, this is only the beginning of the journey.

The cost savings opportunities in the indirect space can be complex and affect a broad group of departments and stakeholders within an organization. This is not necessarily a one-size-fits all blanket statement, as there can be a wide range of complexity among categories, industry, or organization.

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Our white paper includes helpful information on:

• Establishing change management
• Understanding where change management begins
• Pinpointing fallacies of a national preferred supplier program
• Critical change management success factors 
• And MORE!