Procurement

Don't Get Distracted By Counting the Pennies

Dec 11, 2014

In early November 2014, Staples Advantage (Staples' B2B operation) announced the results of a study they conducted regarding the role of telecommuters in the procurement process. They concluded that this small but growing portion of the workforce is not being properly incorporated in terms of their spend, adherence to process, and inclusion in the budgetary cycle. Since the research was sponsored and administered by Staples, it is easy to assume that they are thinking about the office supplies that remote employees are buying off contract and paying for through unexpected channels.

Of the 200+ procurement officers who participated in the study, only 28% indicated that their organization takes telecommuters into account when budgeting. The study also found that for companies that permit telecommuting, less than 10% of the employees work via this method. I know what you are probably thinking: that the resulting variability in budgeted spend due to telecommuters is probably more of a rounding error than a new sourcing opportunity. When you compare the cost of supplies to payroll, benefits, software, hardware, and mobile - all of which should be administered centrally and therefore be unaffected by each individual employees' final work location - the additional or alternate effort is hardly worth procurement's time.

Although this is a reasonable reaction - I'll admit, I went there too - I do not feel that we can dismiss Staples' findings or conclusions. I actually applaud them for taking a strategic approach to office supply costs, more commonly known as "the-lowest-hanging-fruit-indirect-spend-category," and routinely handled by new hires and trainees. No, in this whitepaper (which you can download here), Staples demonstrates how to implement a category management thought process, and how even this category of indirect spend still offers opportunities for procurement to demonstrate value potential to the organization.

Here is the thought process I went through:

Dismissal: Why am I thinking about the office supply spend for a tiny fraction of the employee base at this company? This is not the kind of value procurement has been tasked to create, and there is a very good chance that it will cost more in terms of my salary to pull this spend in than it could ever create in either savings or volume leverage. On the other hand, a trusted colleague passed me this white paper to read - and he would not waste my time. I should give it another chance.

Curiosity: Interesting... so telecommuters only work from home sometimes while full remote workers always work from an alternate location. I wonder where the intersection of cost, savings, and performance benefits needs to be to put an employee in one category over another. Perhaps the organization should re-evaluate which roles can be filled remotely based on this quantitative understanding of the trade-offs.

Instinct: All employees are associated with the costs of salary, benefits, laptop, software, and mobile devices. The costs associated with an office employee that do not apply to a remote employee are consumable supplies, facility space, and amenities (coffee, copy/print, the occasional slice of birthday cake). And yet, according to Staples' findings, productivity and health are better for telecommuting employees. I bet that additional productivity or quality of life more than pays for a case of pens or a toner cartridge a year. On the other hand, there may be travel costs that have to be factored in. This deserves a full cost model.

Strategy: After looking at the numbers, it would seem that for certain roles, not only is it cost effective to allow employees to telecommute, it is less costly than our current contingent workforce contract allows us to achieve. So for the right role and the right candidate, we can get a full-time direct employee that is dedicated to the company and will not be rotated off to meet the requirements of another contract.

This is just one example. Everyone in procurement wishes that less emphasis was placed on savings in our performance metrics, but it actually affects our judgment more than we realize. If you can't get past seeing a project for the relatively low potential for savings, much higher impact opportunities may pass you by as well.