Tag Archive for: Strategic Sourcing

Key Considerations for a Gainshare Sourcing Engagement (part 2 of 2)

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Highlights:

Gainshare strategic sourcing programs can be the key to enhancing your internal team unlocking more savings, faster.  There are a number of pitfalls and challenges to proactively manage when engaging a consultant on a gainshare basis, including:

  1. Only pay fees for hard-dollar savings
  2. The consultant implements savings
  3. The consultant has demonstrated success within the categories assigned
  4. The consultant respects and nurtures supplier relationships
  5. An objective measure of savings is defined at the outset of each project
  6. The consultant is culturally and strategically aligned
  7. The fee structure, its variables and mechanics, are clear to you

To ensure success on a gainshare strategic sourcing program, it is important to be aware of the pitfalls that can occur during the engagement. By avoiding these pitfalls, you can ensure that you are getting the most out of the program and avoid the risks and challenges that can arise. Savvy procurement leaders always seek new and innovative ways to reduce cost and increase savings. However, they are often constrained by the limitations of their own team, data, and market insights.  One of the most popular ways to enhance internal capabilities is by partnering with a strategic sourcing consultant on a gainshare program. Many companies prefer this engagement structure as the consulting fees are paid based upon savings delivered, so no budget is required to bring the firm onboard. Yet, it’s important to be aware of best practices to managing such a program. 

Hard-dollar Savings

Make sure that the fees you pay are only based upon real, demonstrable, hard-dollar savings.  The consultant should track and provide savings reporting monthly and work with suppliers to resolve billing issues and stakeholders to drive compliance so the savings you’re paying for are actually hitting your bottom line. This means working with suppliers to make sure billing reflects what was negotiated in your contract and working with stakeholders to ensure purchases are being made from the right suppliers under the right contracts. Soft savings should not be included in a gainshare calculation, as it’s difficult or impossible to objectively quantify them and they are not always realized.

Implementation

This ties closely to hard-dollar savings.  It means that the firm will execute on agreed to strategies and follow them through until you start seeing the savings outcome in real dollars coming off your invoices from your suppliers.  With implementation included, you are not paying for forecast savings or savings that may be unrealistic or unattainable.  Instead, your fees will be based on the strategy that you decide and the outcomes the consultant drives.

Category Risk

It is important to be selective when choosing a consultant. Unfortunately, not all consultants are reputable or experienced in implementing significant savings. They may not be familiar with the optimal strategies and best practices in your industry or within the categories they’re supporting.  These gaps can lead to them causing more harm than good from a process perspective, potentially squeezing suppliers too tightly and/or compromising quality and service requirements to get to the savings results required for them to ensure profitability.  Quality consultants will have demonstrated success in the categories that you’re sourcing, strong implementation discipline, and market intelligence and benchmark data to drive savings, no matter the strategy you decide.

Cultivation of Supplier Relationships

A best-fit consultant will have the experience and data to navigate categories swiftly and efficiently.  This includes bringing information to the negotiating table that’s fact-based.  The ability to do so will allow the consultant to engage and motivate suppliers, navigate and manage the existing relationship, and negotiate through less iterations over a shorter period of time without beating them up towards unachievable pricing, terms and conditions, and service levels.

Objective Baseline

Establishing an objective baseline and savings calculation methodology is key to a successful gainshare strategic sourcing program. If you fail to do this, you risk paying fees for forecast savings, soft savings, or artificially inflated savings. An objective baseline is a defined starting point against which future savings are measured. This helps to ensure that savings achieved are real and not due to market fluctuations or other outside factors. It’s also important to have a clear savings calculation method in place. This will help to ensure that all parties involved – including the consultant – understand how the savings are being calculated and can verify that they are accurate.

Long-term View

A consultant should operate with long-term view of the relationship including strategic and cultural alignment. This will help them to achieve short-term wins while setting the stage for long-term results. Additionally, it will prevent them from making decisions that may be acceptable in the short-term, but hinder progress or create challenges in the future.  This does not mean that you should forego quick wins, which are a critical success factor in any savings program.  Instead, it means ensuring that the analysis and decision making throughout the process needs to account for tomorrow and a long-term time horizon that makes sense for a given category, typically 5+ years.  Do not allow yourself to be blinded by short-term results, only to have to face unnecessary impediments in the future, when the consultant may be long gone.

Fee Structure

If you are looking for pure gainshare, then make sure it is.  This means that there are no base fees, minimum fees, or any other charges that are tacked on to the gainshare amounts.  Gainshare models can vary significantly, so if you are going to agree to a hybrid structure, make sure that the basis for the non-gainshare fees is sound.  Typically, this includes a clear opportunity assessment and roadmap with a savings forecast for each category (if not all of the constituent projects within that category).  Without this clarity, you risk overpaying and/or not getting the return on investment you were expecting. 

Big Picture

Gainshare sourcing is as popular as ever.  Despite this, many have never worked with a consultant under such an arrangement, or make the mistake of assuming all consultants and their commercial models are the same.  Being aware of the differences and how to navigate and manage them is vital to a successful program and realization of your savings and spend management objectives.

Tag Archive for: Strategic Sourcing

AI in Procurement: Practical Insights Beyond the Buzz

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Procurement leaders already know that AI is important.   However, where it’s actually worth applying right now is more difficult to determine, especially when the function is still balancing cost pressure, stakeholder demands, supplier issues, and a long list of work that is not going away.

That is where the conversation needs to get more practical.  The near-term value of AI in procurement is not that it replaces procurement work. It is that it shortens the distance between data, judgment, and action.  It helps teams get to a clearer view faster, reduce manual effort, and move work forward with less delay.

Like most things worth doing, the best starting point is usually the least glamorous one.  AI is already useful in areas where teams spend too much time organizing information before they can even begin making decisions.  Spend cleansing, supplier clustering, contract clause extraction, and first-pass reporting are all examples of this. These are not headline-making use cases, but they matter because they reduce friction in work that shows up every week.  When procurement can shift focus to taking action rather than wrangling data, the value is immediate.

There is another group of use cases where AI can clearly help, but human judgment still matters too much to pretend otherwise.  Sourcing strategy is one.  Negotiation preparation is another.  Supplier risk reviews, opportunity sizing, and supplier performance trend analysis also fall into this category.  AI can summarize inputs, spot patterns, identify outliers, and give teams a stronger first cut.  What it cannot do, at least not in a way most organizations should fully trust yet, is weigh internal politics, judge stakeholder readiness, or navigate commercial nuance on its own.  Procurement still has to do that part.

That distinction can’t be overstated because it helps companies avoid two mistakes.  The first is expecting too little from AI and treating it as a nice-to-have productivity tool.  The second is expecting too much and chasing a fully autonomous future before the function is ready for it.  There is a lot of marketing noise right now around agentic AI, autonomous procurement, and end-to-end intelligent workflows.  Some of that direction is real, and over time it will matter a great deal.  But most procurement teams do not need to start there. In fact, many probably should not.

What they should not overzealously pursue right now are the use cases that sound impressive but depend on weak process discipline, unclear ownership, or black-box logic.  Fully autonomous sourcing decisions fall into that category.  Opaque savings predictions that no one can explain also do, or AI-led supplier management that ignores the reality of live business relationships.  These ideas may become more viable over time. For most clients, they are still the wrong first bet.

A better approach is to choose one or two use cases where the work is frequent, measurable, and frustrating enough that improvement will be felt quickly.  Start where teams already know the pain.  Repetitive RFP drafting.  Contract abstraction.  Supplier performance summaries.  Pipeline reporting.  Keep humans in the loop.  Define what good looks like before the pilot starts.  Then, use the pilot to test the tool and expose the data and process issues that may be slowing the work down in the first place.

This is where AI becomes more than a buzzword.  It becomes a way to make good procurement teams faster, more consistent, and more responsive.  Over time, more advanced tools and agentic models will take this further.  They will improve reliability, automate more of the workflow, and support better decision-making at scale.  But procurement does not need to wait for that future to start getting value.

The companies who will benefit most in the near term are not the ones chasing the biggest AI vision, they are the ones choosing a few smart places to reduce delay, improve visibility, and move from analysis to action faster.

Supplier Risk Execution: Going Beyond Assessment

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Most organizations do not have a visibility problem when it comes to supplier risk.  They have a follow-through problem.  Scorecards are built, dashboards are reviewed, and red flags are discussed.  Then the meeting ends, and very little changes.

That is where many supplier risk programs fall short.  Assessment is important, but it is only the starting point.  If a supplier keeps missing delivery targets, quality slips continue, or financial stress indicators worsen, the value of that visibility depends on what happens next.  A scorecard that does not trigger action becomes documentation, not risk management.

This is why supplier performance data needs to be treated as a living operational signal rather than a quarterly reporting exercise.  The point is not to admire the trend line.  The point is to use it.  When performance starts to move in the wrong direction, the response should be timely and deliberate.  Waiting for the next formal review cycle often means waiting too long.

That response does not have to be dramatic.  In many cases, it starts with something practical and structured.  A corrective action plan with clear owners and deadlines.  A focused supplier meeting to address recurring issues.  A site visit or process review for a critical supplier.  A temporary escalation path when a pattern shows up more than once.  The important thing is that the risk signal leads to a decision, not just another data point on a slide.

Not every supplier issue deserves the same level of response.  A high-risk supplier supporting a critical operation should not be managed the same way as a low-spend vendor that is easy to replace.  Risk tiering matters, but it should shape the action plan, not just the label.  Too many organizations score suppliers carefully and then respond to every issue in roughly the same way, which usually means not much happens unless the problem becomes severe.

Ownership also matters more than most scorecards suggest.  Who owns the supplier relationship?  Who owns the corrective action plan?  When does Procurement lead, and when should Operations, Quality, Legal, or Compliance step in?  One of the fastest ways for supplier risk management to stall is when everyone assumes someone else is handling it.  If execution is the goal, ownership cannot be vague.

There is another point worth making here.  Sometimes the supplier is not the only source of the problem.  Weak forecasts, last-minute changes, unclear specifications, or inconsistent communication from the customer side can all contribute to supplier instability.  Mature supplier risk management looks inward as well as outward.  If the buying organization is helping create the conditions for poor performance, the corrective action needs to include internal change too.

A stronger supplier risk program is not necessarily a more complex one.  It is one that connects signals to actions in a routine, disciplined way.  Issues are identified early.  Owners are assigned.  Timelines are set.  Escalation paths are clear.  Progress is reviewed until the issue is closed or the supplier strategy changes.

That is the shift.  Moving from reviewing supplier performance to actively managing it.  Moving from static scorecards to operational signals that drive response.  Supplier risk is not reduced because it was measured.  It is reduced because something changed.

Do It With You vs. Do It For You Models – Flexible Service Delivery Options for Procurement Teams

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Many procurement leaders know exactly where the value is in their spend.  They have category strategies, opportunity assessments, and a long list of projects they would like to tackle.  What they do not have is the capacity to execute all of it while still supporting the day-to-day needs of the business.

That is where managed services come into the picture.  The challenge is that “managed services” can mean very different things.  Some organizations want a partner in the trenches with them.  Others need a team that can take a portion of the work and run with it independently.  Most need a mix of both, and that mix can change over time.

What a “Do It With You” model looks like

In a Do It With You model, the internal team stays at the center.  The partner is there to bring structure, bandwidth, and experience, but not to replace the client’s role.

This can take many forms.  Co-sourcing on specific categories, where the partner handles analytics, market research, and event design while the client leads stakeholder engagement and final negotiation.  Standing up playbooks, templates, and sourcing tools, then working side by side with the client team as they use them in live projects.  Providing coaching to newer category managers on how to manage suppliers, run reviews, and navigate internal approvals.

The value here is that the client builds capability while still getting work done.  The internal team keeps direct control of supplier relationships and decisions.  The partner helps them move faster and more consistently, but the model is intentionally collaborative.  It works well when leadership wants to strengthen the in-house function, not just clear a backlog.

What a “Do It For You” model looks like

In a Do It For You model, the client asks a partner to take clear ownership of a defined slice of the work.  The emphasis is on outcomes and capacity relief.

A typical example would be a sourcing wave plan across several non-core categories.  The client agrees on scope, objectives, and decision checkpoints.  The partner then leads the day-to-day work, from data gathering and event design through supplier outreach, negotiation, and recommendations.  Reporting focuses on progress against milestones and value delivered, not hours spent.

This approach is especially useful when there is more addressable spend than the internal team can handle, or when there is a time-bound value creation plan.  Private equity backed companies, post-merger integrations, and large transformation programs often fall into this category.  Leadership wants to see results within a clear window, and a Do It For You model allows internal staff to stay focused on critical relationships and internal change while still making visible progress on sourcing and savings.

Execution can sit anywhere on the spectrum

The reality is that execution rarely falls neatly into one model or the other.  EaaS and other managed services can flex depending on the category, stakeholder group, and timing.

For some categories, execution may mean structured savings identification and early-stage sourcing.  A partner can benchmark, map, and validate a pipeline of opportunities, then hand that to the internal team with credible savings estimates and suggested approaches.  For others, the partner may run events through to contract while the internal team stays close to the business to manage impacts and adoption.

In many engagements, the mix shifts over time.  A client might start closer to Do It For You to address a backlog or hit near-term targets, then move toward Do It With You as internal capability grows and priorities stabilize.  The important point for clients is that “execution” is a flexible concept.  It can mean sizing the opportunity, running the event, supporting implementation, or helping sustain savings, depending on what is needed most.

What makes either model work

Regardless of where a program sits on the spectrum, a few factors tend to determine success.

Clear scope is the first.  Both sides need a shared view of which categories, suppliers, or initiatives are in play.  Vague expectations such as “help us save more” usually lead to misalignment.

Aligned definitions of success are next.  That includes how savings will be calculated, when benefits are considered realized, and which other outcomes matter, such as risk reduction, speed to contract, or stakeholder satisfaction.  Bringing Finance and business sponsors into that conversation early pays off later.

Governance is also critical.  Roles should be explicit.  Who owns stakeholder communication.  Who can make which decisions.  How often progress will be reviewed and in what format.  When this is handled well, the partner feels like an extension of the internal team, not a separate track of activity.

Finally, there should be an intentional plan for knowledge transfer.  Even in a Do It For You model, each wave of work should leave behind better documentation, insights, and tools.  Over time, that makes the client team more capable, whether they choose to keep working with a partner or bring more activity back in house.

Flexibility for the right mix

For most organizations, the real question is not “Do we want a Do It With You or a Do It For You model?” It is “Where do we need each approach over the next 12 to 24 months?”

Some categories or programs will benefit from hands-on partnership and capability building.  Others will require a provider to take the lead so the internal team can focus on strategy, stakeholder management, and change.  Flexible managed services allow procurement leaders to adjust that mix as conditions change, rather than locking into a single model that may not fit every part of the portfolio.

When framed this way, the conversation shifts from buying capacity to designing the right blend of support.  Clients can see where a Do It With You approach will build strength for the long term, where a Do It For You model will relieve immediate pressure, and how both can work together to keep strategy and execution moving at the same pace.

Quantifying ROI Faster: Predictive Modeling for Sourcing Outcomes

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Many procurement teams find themselves having to prove their value after the fact. A sourcing event runs, a negotiation finishes, and then someone builds a business case that explains the savings. By that point, stakeholders have already moved on to the next priority.

Predictive modeling offers a different path. Instead of waiting for results, procurement can use the history it already has to estimate likely outcomes before launching an event. That does not require advanced tools or data science teams on day one. More sophisticated platforms will push this further over time, but there is a practical version most teams can start using now.

From rear-view reporting to forward-looking choices

Today, a lot of sourcing work still relies on judgment and anecdote. A category “feels” like it has potential, or someone remembers a good result from a similar project a few years ago. That may work occasionally, but it is hard to defend in front of Finance or the C-suite.

Predictive modeling in this context is simple. It means using past events, market context, and a few key attributes to estimate what is likely to happen if you run a new project. Not with perfect precision, but with enough confidence to decide whether the effort is worth it and how to prioritize it against everything else on the roadmap.

What predictive modeling looks like in sourcing

In a sourcing environment, a predictive model does not have to be complex. It can be as straightforward as a structured way of saying, “When we run events like this, in categories like these, under these conditions, we usually see a certain range of outcomes.”

Inputs that tend to matter include:

  • Historical savings by category, region, and supplier landscape
  • Contract age and baseline quality
  • Market and benchmark data where it exists
  • A simple view of stakeholder readiness or change complexity

With even a modest amount of structured history, you can start to see patterns. Those patterns can then inform expectations for new events. The point is to move away from starting every business case from a blank page.

Where predictive modeling speeds things up

Predictive modeling is most useful when it helps you move faster, not when it adds another layer of analysis. A few places where it tends to make a difference:

It can help you prioritize the pipeline. When you have a long list of potential projects, a modeled view of likely savings ranges and probability of success lets you focus scarce capacity where the combination of impact and feasibility is highest.

It can help you build business cases more quickly. Instead of estimating benefits from scratch for each project, you can use modeled bands informed by similar past events. Finance will still challenge assumptions, but you begin the conversation with data that reflects real history rather than guesswork.

It can also guide the sourcing approach. Some situations merit a full competitive event. Others might be better served by a targeted renegotiation, a benchmark refresh, or a contract extension. Prediction helps you decide which path is likely to produce enough benefit to justify the time and stakeholder attention required.

Starting with the data you actually have

Many teams hesitate because their data is not perfect. Waiting for perfect data usually means waiting indefinitely. A better approach is to start with what is available and improve over time.

At a minimum, you need a record of past events that includes baseline spend, realized outcome, and a small set of attributes such as category, supplier type, region, and event type. If you also capture contract age and a basic sense of complexity, that is a bonus. Market and benchmark data can be layered in where it exists.

The goal is consistency, not sophistication. A small, clean dataset is more useful than a large, messy one. As more projects run and more records are added, the quality of predictions improves.

Changing conversations with stakeholders and Finance

Once you have even a basic predictive view, the tone of internal discussions starts to shift. With Finance, procurement can say, “For the last set of events that looked like this, here is the range of outcomes we saw,” and use that history to frame targets and recognition rules. That feels different from asking them to accept a single-point estimate based on judgment alone.

With business stakeholders, you can share a portfolio view. If they support a certain set of projects, here is the likely range of benefit and timing. That helps them decide where to engage first and what to defer, based on their own priorities and constraints. It also makes tradeoffs more transparent.

At the leadership level, sourcing plans can be presented as an ROI roadmap. Instead of a list of categories, you can show predicted value by quarter, by theme, or by strategic objective. Over time, you can also compare predicted results to actuals and refine both the model and the way you communicate impact.

Guardrails that keep predictive models useful

A few simple practices help keep predictive modeling grounded.

  • Treat predictions as ranges, not guarantees
  • Refresh assumptions regularly as new outcomes come in
  • Be transparent about which factors drive the estimates
  • Leave room for judgment when unique situations arise

These guardrails make the model a decision support tool rather than a rigid answer engine.

A practical step toward more advanced tools

Over time, predictive modeling for sourcing outcomes will be embedded in more advanced platforms and AI tools. Those systems will bring greater speed, more automation, and tighter integration with external data. Many procurement teams will eventually use them.

In the meantime, building a basic predictive approach with the data you already have is a realistic step. It helps you quantify ROI faster, make better choices about where to focus, and have more confident conversations with Finance and stakeholders. When you are ready to adopt more sophisticated tools, you will already have the mindset, the data habits, and the internal credibility to get real value from them.

Procurement Managed Services: Plug-and-play capacity without building in-house

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January is when procurement teams get a fresh list of priorities and, often, an unchanged or disadvantageous org chart. New savings targets. New stakeholder asks. More urgency. The same number of people (or fewer)

That is why procurement managed services keeps coming back. Certainly not because it is trendy, but because it deals with the part no one can talk their way around: throughput. How much work can your team actually push through the source-to-pay process without quality slipping or stakeholders losing patience?

Here is a realistic scenario. It is mid-February. A business unit flags a wave of contracts expiring in the next 90 days. At the same time, Finance asks procurement to “move faster” on a list of categories tied to the year’s savings goal. Then Legal changes language in a standard template, which means a bunch of agreements already in flight need a quick re-route. Nobody individually caused the pileup, but many organizations end up just like this due to incremental systemic shifts.

When markets are calm, teams sometimes patch the gap with late nights and a few favors. In a volatile year, that becomes the operating model. Stakeholders still buy. They just stop waiting.

Capacity becomes strategy when it is measured

A lot of procurement conversations start with headcount. Should we hire? Should we bring in contractors? Should we restructure?

Those can be valid moves, but outcomes are the better starting point. What needs to get done, how fast, and how consistently?

For the sake of illustration, here are a few metrics usually cut through the noise:

  • Cycle time from intake to award
  • Sourcing events completed per month
  • Contract turnaround time for common agreements
  • Compliance to preferred suppliers and buying channels

If those move, procurement becomes easier to work with, adoption improves, savings is less dependent on heroics, and supplier risk management gets more proactive.

Where managed services often fails is simple. The program tracks activity, not outcomes. You get lots of motion, and the business still complains that nothing is getting done.

What procurement managed services actually is

Procurement managed services is a standing delivery capability that runs inside your environment…with your P2P platform, your intake process, your approval paths, your policy, etc. It is designed to be “always on” rather than a one-time project.

It typically covers work that is steady, repeatable, and high enough volume that it creates real drag when the team is stretched. The scope depends on your operating model, but common areas include:

  • Intake and triage, including intake-to-procure workflows and stakeholder routing
  • Tactical buys
  • Strategic sourcing execution for defined categories and tail spend management
  • Supplier onboarding support and supplier management activities
  • Contract management support, including template coordination and routing

The scope of these activities needs to be clear. If the engagement is vague, it usually turns into staff augmentation under another name.

Where it tends to work best

Most organizations do not need managed services everywhere. They need it where the gap between demand and capacity is persistent, and where inconsistent execution is creating real business friction.

One common trigger is a backlog that never really goes away. Intake builds up, stakeholders get used to waiting, and “quick buys” creep back in. Tail spend grows. Then procurement gets blamed for low compliance, even though the root problem is that the system is too slow to use.

Another is when procurement has a strong savings pipeline but cannot execute fast enough to realize it. The plan assumes a certain number of sourcing events per month. The calendar and reality say otherwise. This is where outcome-led managed procurement services can be a force multiplier, because it converts plans into throughput.

There is also a benefit many underestimate: stakeholder experience. When internal customers do not know what to expect, they work around procurement. When there is a clear intake channel, predictable cycle times, and a team that responds quickly, behavior changes. This is how compliance improves without having to “police” people.

How to buy it without buying disappointment

If you are evaluating procurement managed services, start small and make it measurable. Pick a handful of outcomes that matter, define what “done” means, and build the model around those outputs.

A few decisions matter more than the rest:

  • Define service levels up front, including cycle time targets and volume assumptions
  • Make swim lanes explicit between internal procurement, Legal, Finance, and the managed team
  • Set a weekly prioritization cadence and a monthly value review cadence
  • Require documentation and playbooks as deliverables so process knowledge compounds over time

One small tangent that is worth calling out. Tools do not fix this on their own. A new intake workflow or a shiny source-to-pay upgrade can help, but only if someone runs the process with discipline. Many procurement teams already have solid procurement technology. What they lack is enough capacity to consistently operate it well.

If your 2026 plan assumes faster execution without adding headcount, managed procurement services is a lever worth taking seriously. Capacity becomes strategy when it is tied to outcomes you can measure, govern, and improve.

Tag Archive for: Strategic Sourcing

How to Optimize Marketing Sourcing

The most critical step in transformation is to evaluate the roots of the of existing capability.