A guide to indirect spend #1: Office supplies

12 March 2012
Scrutinising critical spend categories to ensure your organisation is sourcing at best value from the right suppliers is bread and butter to purchasing teams. But the breadth of spend categories under management in most businesses means those teams have to focus most of their energies on the high value direct commodities critical to business operations, with the danger that savings are left on the table when it comes to negotiating some of the core indirect categories. There are fundamental questions to be answered to discover how to drive savings. Which categories offer the biggest savings opportunity? What tactics are required to achieve the best outcome? How frequently should sourcing activity be repeated on a category? How much room for bargaining and negotiation does a category hold? Over the next six weeks, I’ll be providing insights into the six “top trades” every sourcing team must have on their priority list. And we begin this week with the number one, office supplies. Invariably, one of the biggest indirect spend categories in any business, it is predicted the global market for stationery products will be worth £100 billion by 2015. But despite its position as an established reverse auction favourite, the level of product variation and its ability to be broken down into many elements can still present a minefield of choices that must be navigated carefully. In engaging with office supplies companies that have faced many e-auctions, I recommend a well-constructed approach based on a high degree of knowledge. With many suppliers also offering a competitive alternative in related areas such as paper and generic print, office supplies sourcing is large in scale and complex. Tactical category expertise is of particular benefit in navigating through all the options and choices. One well-proven stationery sourcing strategy is to run both forward and reverse e-auctions in parallel to identify and drive best value across a range of core and non-core items. A reverse auction on a well-determined list of core items finds the most competitive suppliers and forward e-auctions can uncover best value on non-core items where suppliers may otherwise seek to recoup margins conceded from the core list. Splitting the stationery requirement up across contracts with two or three suppliers to achieve best value can also keep the category competitive, but this should be made clear throughout the sourcing process. The additional costs of multiple supplier management must also be factored into the final best value evaluation. In summary, if you’re seeking to tackle sourcing best value, office supplies has a high degree of potential due to its sheer scale. However, its complexity means that I always handle it with care, keeping a tactical mindset at the fore. * Temeena Hussain is a sourcing consultant at Wax Digital. Next week: IT consumables
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