Though procurement organizations frequently turn to strategic sourcing to negotiate better rates and drive more savings for the enterprise, they often fail to deliver sustainable results. The savings identified and expected from strategic sourcing initiatives do not always translate into realized savings, and even when they do, they begin to erode within a couple of years. This savings shrinkage is primarily due to the myopic focus on negotiating lower prices and better contract terms, without adequate processes, metrics, resources, or changes in buying behavior to sustain these savings.
For procurement organizations across the world, the metric that most often defines their performance is projected contract savings, validated by finance.
These contracted savings are usually expected to become realized savings by the executive management. The journey — from approval and contract signing at the front end and banking the realized savings at the back end — is driven by developing and executing a thoughtful and effective compliance strategy. That is where the real challenge lies.
This white paper discusses some common pitfalls of strategic sourcing initiatives in driving sustainable results, which only a robust compliance process can help overcome.