It is a widely-held and understood belief that sourcing disciplines provide techniques that can fine-tune the running of an organisation. However, developing and rolling out a full strategic sourcing plan will not secure you significant cost benefits in the short term – as cost benefits typically appear in the mid-term.

Counter-intuitively therefore, the most effective course of action is actually to simply make the best of the sourcing structure already in place. However, this should go far beyond squeezing the best value out of the various suppliers. Through ‘good housekeeping’, you may discover areas where you can reduce the costs of your sourcing arrangements to:

• Reduce or eliminate demand – address false demand, created by a lack of knowledge, rework or customer error. You may find that you are paying for services you are not using, or even effectively paying for the same service twice.

• Revisit all changes – review all changes made since starting the service and, where the price has increased as a result of the change, understand whether you can revert to the original approach. At the same time, assess the current service levels and understand whether you really do need the targets you have agreed with the provider.

• Expand scope – look for simple opportunities to develop the scope of services that your sourcing arrangements provide, taking further cost out of the wider organisation. For instance, consider moving higher knowledge-based processes and tasks into your arrangement, such as market research, analytics and data management.

• Extend reach – pull in the organisational outposts that originally declined to take up the services, often for obscure reasons on how they are different. Standardising operating models across all territories and divisions allows for a much greater return on a shared service investment.

• Simplify and standardise – Many organisations have historically managed sourcing at an individual business level, resulting in multiple arrangements with multiple providers. Instead, explore the rationalisation of your provider base, and consider the removal of service overlaps for further economies of scale.

• Review your governance processes – check that your governance approach is delivering the value and benefits you expected. Could controls be tightened to prevent value leaking from your arrangement?

• Ask for a discount – many of our larger clients are actively reviewing their existing sourcing contracts, often accompanied by a request for a discount or a change in the phasing of payments. If approached in the right way it can be successful. But remember your service provider exists in the same cash-constrained environment, so there will be limits of what they can feasibly offer. In exchange, consider whether there is anything that you have that they value, such as references, assets or additional scope.

This blog is an extract of PA Consulting Group’s new book, ‘Surviving and thriving in the economic crisis: The sourcing opportunity’, and is available free of charge. To request a copy of the book, please visit http://www.paconsulting.com/sourcingopportunity