Office Supplies Best Practices and Dense-Pack Sourcing
Category Management at Its Best
By Dr. Tom
DePaoli
Best practices
for Office Supplies are many and varied. They greatly depend on what the
customer wants or the Voice of the Customer (VOC). Once I was tasked with
completing an office-supplies sourcing search for a client in a major western
state city at their headquarters, which housed approximately 5,000 employees
downtown. I had much previous experience completing four strategic sources of
office supplies, so I had a fairly good idea of the competency of the suppliers
and their pricing structures. I knew which additional
total-cost-of-ownership practices to ask for, such as desktop delivery,
consolidated billing, and electronic catalogues. It was an exceptional
situation for a supplier, because it was one delivery spot for major sales
volume. Composing the request for a quote was straightforward, and I used many
of the requirements that I had previously used in sourcing requests. My client
was eager to get the sourcing process underway and completed quickly.
However, I soon
discovered that there were three other large companies in the same city block
housing an additional 15, 000 employees (20,000 total). I saw an opportunity to
pool our volumes and presented a proposal to my client. I had shared our
expected price reduction and other savings with them prior to the engagement.
Now I proposed to the client to construct a request for quote for all of us for
office supplies, thus providing even more leverage. I named it the “dense-pack”
approach because, once again, the winning supplier would have concentrated
deliveries in a close area, which would significantly reduce the winning
supplier’s transportation costs. The purchasing managers were skeptical at
first, but luckily none of the other companies were direct competitors.
The hardest
part of this approach was next: convincing the other three companies of the
merits of this approach. I recommended that they each set up steering
committees to choose what services they desired. We sort of used a cafeteria
approach where each company selected the service they desired. Fortunately, all
of them were familiar with supply management and strategic sourcing. I had to
show the expected savings and get them to agree to at least some common
total-cost-of-ownership reduction items. Gathering the usage data was another
challenge, but we believed that we had fairly accurate volume data when we went
out with the request for a quote. Getting agreement to go with the winning
quote was not as difficult as I had anticipated, and all four companies had two
representatives on the sourcing team. Each company agreed to select their
specific supplier services that they valued and asked the suppliers to
demonstrate their capability and client references.
The results
were fairly astounding, and we doubled the expected price savings. The winning
supplier then offered a cafeteria menu of total-cost-of-ownership savings and
enhancements that each customer could select.
In addition,
most of the companies “piggybacked” with the office supplies supplier on other
services like document management (copiers), personal computer supplies etc. It
also led to standardization of the office supplies used which further reduced
prices.
We were not
satisfied with the initial success. We expanded the office supplies category
and added more items to the category! We created a mega-category! We
included copier paper, computers, computer supplies, software, cleaning
services etc. We kept expanding the category for even more savings.
In summary, we
clearly understood the market, the pricing structure and the services offered.
The biggest challenge, as usual, was getting customer buy-in and
consensus.
Dr. Tom DePaoli,
(Dr. Tom or Captain Tom), is currently an independent management consultant, the
CEO of Apollo Solutions, which does general business consulting in the human
resources, supply chain and lean six sigma areas. His organization was self-founded
in 1995. He retired as a Captain from the Navy Reserve. In other civilian
careers, he was a supply chain and human resources executive with corporate
purchasing turnaround experience and lean six sigma deployments. He has worked
for over ten major companies and consulted for over fifty organizations
throughout his career. Some of his consulting projects include: information
systems projects, re-engineering organizations, organizational transformation,
e-procurement, e-commerce, change management, leadership training, creativity
improvement, global sourcing and negotiating, especially information-based negotiations.
His industry experience is in the chemical, paper, DOD, pharmaceutical, IT, startup,
automotive, government, consumer, equipment, business services and consulting
industries. He has been published extensively in journals, magazines and books.
He is the author of twelve books all available on Amazon. He has instructed at six education facilities
in numerous roles. He is active in
supporting the YMCA, Wounded Warrior, and the prevention of the bullying of
children.
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