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are purchasing a mix of products with various profit margins and you are able to be selective about which products match given requirement sets, you will likely want to lean toward those with the lowest costs and highest margins wherever possible, offsetting higher cost or lower margin products that are necessary for other requirements. This puts you in an optimal position for the Negotiations phase as you will understand the variables driving cost and where to focus your most efforts.

REVIEW OF TECHNOLOGIES, PROCESSES, PRODUCTS, AND SERVICES

Most Strategic Sourcing initiatives tend to focus on a strict apples‐to‐apples comparison of products or services, meaning that the only options researched or considered are those that match the current requirement. If alternatives are considered, they are often reviewed during second‐stage initiatives, or in lieu of an appropriate process altogether. The pitfall to these approaches is that an alternate supplier may be better suited to fill your future requirements. You won't know this if you sourced to a specification that only pertained to your current requirement.

      Alternative Technologies

      Technology means a lot of different things to different people—from the systems put in place to help you integrate with current suppliers, through the telecommunications systems used to connect you to the outside world, to the software used to manage your business. The one common element across all these technology platforms is that they become dated very quickly.

      If implementing the requirement you are sourcing has a technical component (for example, your current supplier transmits reports concerning a certain product or service that integrate directly into your enterprise resource planning [ERP] system), a cost is most likely associated with that implementation, and many times that cost has already been amortized and used as a reason not to pursue alternative sources of supply. However, it could be that the requirement is outdated and difficult for the supplier to maintain. This may lead them to markup your pricing both to cover their costs and to dissuade you from utilizing that service. It could also be that a different technology may produce efficiencies that would result in less need for management oversight.

      Do not let the desire for achieve quick, easy results persuade you to exclude potentially relevant suppliers or technologies. Exploring these options and performing a thorough total cost analysis (including the cost of change) could provide for cost savings opportunities well beyond what could be gained from a unit‐cost perspective alone.

      Alternative Processes, Products, and Services

      During initial discussions with end users, you may learn that stakeholders are set in their ways. Professionals sometimes develop the mindset that they need to order supplies in a certain way, need specific reports provided on specific days of the week, or need suppliers that are certified (to the end user's satisfaction) in specific processes, software, and quality control methodologies.

      Sometimes there are good reasons for these requirements. Many end users have worked hard to discover what they believe to be the best and most efficient processes or best types of suppliers for your organization. It's possible these choices have historically enabled them to prioritize activities that are aligned to their individual goals and objectives while adding more value to the organization. In other cases, these requirements were developed based on what was most familiar to the end user or because the end user did not want to learn something new. In some cases, the requirements were actually developed by the existing supplier, carefully and intentionally implemented under the guise of free training.

      What end users often fail to realize is that mandating specific processes or other service requirements onto the supply base without considering alternatives can add costs that exceed any efficiencies they provide. First, stringent service requirements can add to the unit cost of the product or service being purchased. You may not get charged extra for those additional customized reports you receive from your current supplier, but it's possible the supplier factored the cost to produce the reports into the unit cost of the item you are purchasing.

Second, developing specific requirements that only a small number of suppliers can meet limits competition and eliminates alternative processes or enhancements that may be more beneficial to your organization. An example of this might be mandating that your supplier have a certain number of years servicing companies in the same market as your organization. Some end users do this intentionally to limit the number of bidders who can respond to an initiative. This inevitably makes the process easier, but often means missing out.

      Another common example of a needless personal requirement is looking for a particular software certification from a supplier as it relates to the company's reporting or transaction management functions in the ERP system. Oftentimes, end users require that any alternate supplier have the same level and type of certification that their current supplier has. Many suppliers can integrate into the major ERP systems or other common software used by most businesses. However, not all suppliers expend the time, energy, and money to go through the process of becoming certified with a particular software publisher. There are many reasons for this; the primary one is that software publishers charge to certify—and these costs can be substantial. Companies go through the certification process to distinguish themselves as partners of a particular software publisher and use that certification in their own marketing, but certification in itself does not always prove that one company is more qualified than another to integrate with a particular system. Ultimately, the only real difference you can confirm (without further research) between a company with a certification and one without is that the certified company paid for the certification.

      In this scenario, if you require some level of integration between your systems and those of your supplier, the real requirement is that the supplier is capable of achieving that integration. This might mean it has experience with your particular software or similar software programs. It could even mean that the company partners with a third party that is certified. To achieve proper supplier integration, you need to work with your IT team to determine the types of information being shared, the formats of that information, and all other relevant technical details. Having a certified supplier with demonstrated experience will bolster your confidence that they can deliver on your requirements, but it does not necessarily mean that they can provide the most value to your organization.

      When evaluating alternate processes and products, consider what role the current supplier may have played in helping develop the requirement. This is especially true when long‐term suppliers are involved or when it appears that only one or two suppliers can appropriately serve your needs. Suppliers usually have a very detailed knowledge of the marketplace and understand the differences between their offerings and those of their competitors. They often customize requirements for products or services to ensure that no other supplier in the marketplace favorably compares during an apples‐to‐apples assessment. This makes understanding the history of a supplier relationship—and who was involved in developing the initial requirement—all the more important.

      Performing a Want‐Versus‐Need Assessment

During the Data Collection phase of your initiative, you determined the current requirement or scope of work. This means you identified the costs associated with a particular spend category and what you expect receive for that money. Hand‐in‐hand with a review of alternative technologies, processes, products, and services, it is worthwhile to determine what the current requirement should be. Many organizations tend to develop a certain level of inertia in their procurement processes—if your organization has purchased a certain item in the past, it tends to use that process well into the future. This is especially true if the reason for the purchase is no longer clear, if multiple end users purchase the same or similar products and services, or if the original purchaser has moved into a new role or has left your organization. Part of the reason for identifying current costs is to determine which of those costs can be factored out entirely.

      Corporate banking—particularly corporate cash management (corporate checking accounts)—provides a particularly striking example of the value a want‐versus‐need assessment can provide.

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