My 13-year-old son has a new favorite saying: “Is it, though?”
I’m not sure where he picked it up, perhaps at school or on YouTube. Regardless, now on a regular basis, if I say something even fairly straightforward like “broccoli is good for you,” he’ll tilt his head to approximately 45 degrees, squint his eyes as if deep in thought, and respond, “Is it, though?” It’s a solid tool in his teenager toolbox. It also drives me bananas.
However, it’s this exact response that comes to mind in the sourcing world when it’s time to revisit a category strategy or reassess a broader procurement strategy. It’s a phenomenon I’ve seen as both a sourcing and procurement leader and consultant—when a contract is due to expire, a category manager may assume that it’s time to renegotiate, extend the agreement or go back to the market with a new RFP. This dynamic sits at the very heart of modern sourcing and procurement.
But is it, though?
By moving directly to sourcing, we are essentially picking up the program in the middle of the path. We lose sight of key stepping stones that assess whether our procurement sourcing strategy should continue forward as is, or if business needs, market dynamics or other factors will require us to change direction. Contract expiry is a useful milestone that, instead of triggering a re-sourcing exercise, should remind us to go back to the beginning, so to speak, retracing our steps to make sure our trajectory is still bearing us to our intended destination. And along that journey, the following elements are important ports of call:
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Performance to Goals
Your category strategy likely began with goals in mind, whether short-term or as part of a 3-5 year vision. Now that you’ve likely spent a few years in motion with your chosen solution, it’s a good time to assess where you are against where you planned to be by now.
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Desired End State
As a companion piece to the question above, has the end state you originally mapped out changed during this time? With so much flux across category areas right now, it’s an important question to consider. Things are moving rapidly, and it’s quite possible that the target you envisioned a few short years ago is no longer the right glass slipper for your organization.
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Business Needs
The sourcing strategy you originally executed was built to meet a series of business needs all along the AQSCIR continuum. Just as your desired end state may well have changed, it is quite possible that some of those business needs may have similarly evolved over time, perhaps in ways that will further inform your go-forward plan.
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Cost
Even though this element of AQSCIR is indicated above, it bears repeating. Inflation, COVID, supply chain issues and other factors may very well have caused your financial needs to shift. Re-assessing both your business requirements and strategic options before you go back to market may not only be wise in this scenario, it may also be critical to meeting the demands of a strapped budget.
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Market Dynamics
Holding the mirror up to your internal organization is important, but just as critical is the exercise of taking a fresh look at what’s happening outside the four walls of your company. The last few years have brought about significant disruption across industries, supplier management and category areas, resulting in both scarcity and innovation in equal measure. Now more than ever, a strategy refresh must involve a meaningful survey of what’s happening in the market.
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Sourcing Strategy
Understanding and agreeing your strategic path forward—whether that be RFP, direct award, in-sourcing, or not sourcing at all—is dependent on each of the questions above. Once you have revisited performance, desired end state, business needs, and market dynamics, it’s time to re-assess your procurement strategy and the way forward. Perhaps this does result in a contract extension or re-sourcing effort. Conversely, the right answer might be a different approach altogether, one that best meets the current state of your business and its unique needs right now.
This is just a small sample of a much larger topic. Feel free to review our insights for additional perspectives on sourcing, category strategy, and effective procurement services. Do these points resonate with you? We invite you to join in the discussion on LinkedIn and share your perspectives. Let’s keep the conversation going!
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FAQs
1. What is re-sourcing and why is it important in procurement strategy?
Re-sourcing is the process of going back to the market to evaluate, select, and contract with suppliers for a category that is already being managed. It is a critical component of re-sourcing because it ensures that the organization is not overpaying for services due to "price creep" or outdated market terms. By periodically testing the market, procurement teams can validate that their current supplier remains competitive in terms of cost, innovation, and service levels, preventing operational stagnation.
2. How do you assess if your category strategy needs a re-sourcing exercise?
To determine if your category strategy procurement requires a re-sourcing exercise, you must evaluate the delta between your current contract performance and the evolving needs of the business. Signs that a re-sourcing exercise is needed include significant shifts in internal demand, a lack of innovation from the incumbent supplier, or a "performance plateau" where service quality has flattened. If the current category strategy no longer aligns with the organization's broader strategic goals, a market test is necessary to reset the baseline.
3. What factors should be evaluated before going back to market for sourcing?
Several procurement assessment factors must be reviewed before initiating a market event. These include the total cost of ownership (TCO), the potential cost of change (switching costs), and the availability of viable alternative suppliers. Furthermore, teams should evaluate the strength of the current supplier relationship—if a supplier is willing to co-invest in innovation or offer significant concessions, re-sourcing may be less effective than a targeted renegotiation.
4. How can market dynamics influence decisions in re-sourcing initiatives?
Procurement market dynamics—such as commodity price volatility, supply chain disruptions, or shifts in the competitive landscape—directly dictate the timing of re-sourcing. If the market is currently a "seller's market" with limited capacity and high prices, re-sourcing may result in higher costs than a contract extension. Conversely, in a "buyer's market" characterized by high competition and surplus capacity, re-sourcing is an ideal tool for driving significant savings and securing better commercial terms.
5. When should a business consider extending a contract versus re-sourcing?
As part of a robust sourcing strategy, a business should consider a contract extension when the incumbent supplier is performing exceptionally well and the cost of switching outweighs the potential savings from a market event. Extensions are also preferable during periods of extreme market uncertainty or when the organization lacks the internal resources to manage a complex RFP process. Re-sourcing should be reserved for categories where there is a clear opportunity for price optimization, technological upgrades, or a necessary change in service delivery.
6. How does WNS Procurement’s 'Category-Led' approach optimize the re-sourcing cycle?
WNS Procurement optimizes the cycle through a category-led approach that uses deep market intelligence to determine the "right time" for a market event. By utilizing the WNS Procurement Re-sourcing Services framework, teams can perform rapid "should-cost" benchmarks to see if current pricing is out of sync with the market. This data-driven foresight ensures that organizations only go to market when there is a high probability of capturing measurable value, avoiding the "noise" of unnecessary sourcing events.