HCMWorks Overview of ProcureCon Indirect Conference – Brief

by Kimberly Smokey, Director of Value Creation

ProcureCon Indirect 2010 became a pioneer in bringing together more than 140 senior Procurement professionals and suppliers to address Indirect Procurement management and optimization, which has historically lacked the corporate focus and discipline of the Direct side of procurement. Given that Indirect Services can be up to 25% of an organizations total expense base, it is an area that has recently received renewed executive focus as an opportunity to positively affect the bottom line results and improve customer service.

ProcureCon2010 highlighted the fact that managing Indirect Services runs the gamut of maturity from novice to master. Even more distinctive was the fact that few companies who had achieved a high level of success in an Indirect Services category were not consistently achieving success across all categories. Some formulated a hypothesis that success was achieved when procurement had C-level support and a clear corporate mandate within the organization, but this proved to be inconsistent with those who had success, without the support or mandate.

So what is the secret of attaining sustainable success within Indirect Services? The recurring theme that we heard from the majority of the attendees was the ability to get detailed visibility into the expenditure data and use it to collaborate with their line of business partners to provide decision alternatives. Due to the fact that Indirect Services has data stored in many internal repositories, in outsourced supplier repositories and/or is non-existent, procurement professionals agreed it was often a daunting task to consistently obtain the level of information needed that could be analyzed and trended.

As the former SVP and Director of Corporate Services Supplier Management for Wachovia Bank, I had an opportunity to share best practices from an organization who invested money and resources in a centralized Indirect Services category management model that generated a 17% cost savings sustained for three years. The corner stone of this success was the ability to obtain the data. Our big “aha moment” was when we discovered our suppliers were able to provide greater than 90% of the necessary information. The realization was paramount for attaining success, however it did not prepare us for the difficulty of defining the process, creating templates and communication plans, establishing a database, designing reports and attaining business line sign-off. However, after establishing the process, we were able to create a reporting process that allowed us to sell our services to the line of business partners by showing them their savings opportunity and providing consulting services to implement and minimize business impact.
I think the consensus from the procurement professionals is that Indirect Services are often emotionally impactful to business manager partners and once the data is in place, success can only be had by creating opportunity to save money but allowing the business managers to make the decision. Organic growth is often the best strategy for optimizing Indirect Services. The business manager partner has to see and realize that the change will insure that the process and value will be better today than it was yesterday.

ProcureCon 2010 highlighted that Indirect Services will become a significant focus for many companies for the next several years and that the opportunity for noteworthy savings and innovation exists.