By Alex Klein, COO at Efficio
“Why use consultants?”
It’s a question procurement leaders need to be prepared to answer when making their business case for procurement transformation. Every organisation is under pressure to do things better, faster. Procurement represents more than 50% of a typical business’s costs, yet many companies still struggle with siloed processes that fail to take full advantage of profit potential and cost optimisation. Deploying consultants’ outside-in approach can help increase the speed at which you are able to transform, redesign and reskill your procurement function, and elevate it beyond the back-office.
Working with a consultant adds a huge amount of value in terms of analytical horsepower as well as influencing and communication skills. They can provide an instant injection of talent and momentum to boost your existing team. They also have the benefit of being able to focus solely on the task without distraction, enabling you to accelerate the broader transformation and fast-track results. But it’s important to understand how to use them in the right way in order to maximise their effectiveness.
When to use consultants
There are three key areas where procurement consultants can add value.
In the words of Julie Andrews, “Let’s start at the very beginning; a very good place to start,” and this is certainly true of engaging procurement consultants. It can be tempting to have your in-house team scope a sourcing or procurement transformation programme before turning to a consultant, but an effective consultant, briefed from the outset, can quickly and accurately size and segment your spend, unearth the opportunities, and back them up with compelling evidence and a clear plan for moving forward. As well as setting the pace for a programme of work, this Opportunity Assessment(https://www.efficioconsulting.com/en-gb/expertise/opportunity-assessment/) phase affords you the opportunity to work with your consultant(s) prior to engaging them for a longer-term or larger scale project.
A short, preparatory analytical stage also means that, should you wish to get your consultant further involved, they will already have a clear understanding of your business and all the tools they need to hit the ground running – much more quickly than if you introduced them at a later stage.
Another effective use of consultants is as interim or project-based sourcing execution resources. The role requires substantial amounts of motivation and tenacity and naturally plays to the consultants’ analytical, numeracy, communication, and influencing skill set. Using consultants to plug gaps in your team means that you can either deliver significant savings while simultaneously building up your long-term capability, or it allows you to streamline your team and then use consultants to top up when sourcing peaks occur.
Procurement IT systems implementation is also an area where significant overruns in terms of both time and cost are all too easy. Here again, consultants can add value, for example, by running a tight Programme Office that ensures an appropriate and locked-down specification and manages the system providers during implementation, ensuring that promised benefits are delivered in a timely manner
How to choose the right consultants
Having decided that you want to appoint a consulting partner, how do you find the right one?
There’s a spectrum of individuals and consultancies to choose from but they can largely be divided into three main groups: large global firms, smaller specialist firms, and individual contractors.
The big strategy houses and audit-based firms have very broad capabilities and a huge amount of expertise. They’re truly global in nature, which can be an important consideration when it comes to cross-border procurement. They also have large industry practices, which can be extremely helpful if your purchases are very industry specific, and they are adept at developing strong C-suite relationships in order to get things done. The trade-off, however, is higher day rates and varying depth of procurement expertise across larger firms, which need to be investigated before contracts are signed.
Smaller specialist consulting firms have been growing at pace and their functional experts are used extensively by private equity firms and the cost-conscious mid-market, who will struggle to achieve a meaningful ROI on the big fees of the premium global consultants. The specialists’ strength is that they often have deeper sourcing and procurement expertise, including in-depth knowledge of specific categories. They know what they’re doing when it comes to sourcing, so they know, for example, where to find the data to put together a category baseline and how to structure an RFP process that really gets your suppliers’ attention.
However, smaller firms often specialise in indirect procurement and often don’t have expertise in sourcing complex direct materials, nor can they offer the on-the-ground local knowledge of the global giants. That said, there are big variances in the size, geographic reach, and quality of the specialist firms. If you find the right partner, niche firms can be highly effective, combining “big firm quality” with specialist firm domain expertise. The perfect match is a winning and cost-effective formula, offering strong individuals, strategic thinking, and hands on skills, all at a reasonable cost.
Individual contractors are even more cost effective than the niche firms and often come with many years of procurement experience, but individuals may or may not have proper consulting skills and typically move at a slower pace. You can find your valuable time eaten up managing a group of disparate individual contractors, when you could be liaising with a professional firm with an established, coordinated approach. Contractors are fantastic for plugging gaps in your team but can prove to be a false economy if used in lieu of a consulting firm on projects and programmes.
With no tangible product to review, choosing the right consulting firm can be difficult. Invite five of them to present their credentials, and their slides will look much the same. Moreover, while the presenter may have a fantastic sales pitch, he or she will not be the one carrying out the project. It is therefore imperative to ask the right probing questions, and to meet and vet the individual team members, in order to ensure that you get their “A team”.
Whichever consultants you appoint, they come at a cost, and it goes without saying that it’s essential to manage this cost from day one. Particularly in the case of a risk-reward relationship, where the consultants’ fees is based on the results achieved, it’s imperative to agree principles, be clear on targets, and monitor progress. The clearer you are throughout the project, the less likely there are to be any unwelcome surprises or mismatched expectations at the end.
It’s also important to secure the consultancy’s Partner’s time. Use them as a sounding board, with regular visits in the initial stages and you’ll find the more you’re in front of the Partner, the more likely you are to get the best performance from their team.
How to best use consultants
Too often, high quality consulting work doesn’t go very far, because recommendations are simply not disseminated and implemented. To ensure your investment in consultants has impact and doesn’t become another shelved report, you must get your people involved with the work. This is best done by creating a blended team. The best way to do this is to pair consultants with your buyers to provide your people with support. Allocate the tasks of data gathering, analytics, and preparing the discussion documents required to get internal stakeholders across the business on board to your consultants. If your in-house team is not yet fully formed, you may have the consultants drive some categories on their own. It’s natural that your people may feel defensive when an external consultant comes in, but a joined-up approach means “one team, one baseline, one saving”, which just makes for better results.
In procurement, where much of the work is category sourcing, it makes sense to deploy your consultants on category-level execution roles. That way, you negate the risk that they produce PowerPoint reports that are not put to use. Instead, they’ll be driving RFPs, so their deliverables, instead of being PowerPoint-based, are, in effect, a set of new suppliers, a new set of contracts, and a tangible saving to the business.
You also want to be sure that when the consultants leave, their knowledge is retained and your buyers have a comprehensive understanding of the sourcing process, the reasons suppliers were chosen, the agreed volumes and pricing, terms of contract, and so on. Put simply, you want your consultants to deliver results and show you how it’s done, hold your hand, and then set your buyers free to drive the process for themselves. With an integrated approach, ideally the sourcing project lead will then be able to make a smooth transition to become the category buyer at the end of the process.
It may sound obvious but, as with all team endeavours, constant communication and feedback are vital. You, as the client, are king, so make sure you’re being heard, and not just when you want your consultants to up the ante. Positive recognition will boost their motivation and performance, just as it does with your in-house team. But if things really aren’t going well with a particular consultant, you need to address it. Speak to the Partner, explain what you’re unhappy about, and insist on a replacement.
Preparing for proficiency
As part of your initial negotiation, establish what consultants will give you when they depart so that the transition is seamless. At a bare minimum, it should be their working documents, but good consultants will provide you, for the categories they sourced, with an ordering system, a savings tracking process and tool, and an ongoing supplier management process. The more of the consultants’ output that can be enshrined in a simple technology tool, the more likely it is to be applied, and you can ensure that savings will continue to roll in for your organisation, long after the consultants have left.
Ultimately, the best use of consultants is to use them early on, driving benefits delivery while your team is still in the process of being built. By bringing them in early, they can help coach and train your people in strong sourcing and category management, and they can do the heavy lifting (creating the baseline, creating the RFP documentation, running the RFP process), thus filling in for the missing in-house staff. Once your team is firing on all cylinders, you can cut the consultants, but by taking this approach, your procurement function will drive savings from day one, rather than losing a year while you build your team.
