Jack of All Trades

I often get asked why I chose to make a career in indirect procurement over direct procurement. Why I prefer to be jack-of-all-trades saddled with dealing overwhelmingly large number of suppliers and material categories having diversity of contracts that cover mostly intermittent services. Would it not be more meaningful to work on the bigger stuff in direct procurement?

It is often not easy to respond without wading into a controversy.

Sweating the Smaller Stuff?

In many organizations, direct procurement is more recognized internally and gets better supported by senior management than indirect. This is because it supports production of goods. Consequently, it receives, more attention, resources, and access to key stakeholders.

Indirect spend takes up only a portion of the overall procurement function. APICS estimates that indirect costs account “for as much as 25 percent of a company’s expenses”. Nonetheless, its importance has increased significantly over the years. Firms have witnessed a significant increase in the cost of business services and post the pandemic and indirect costs have been rising for most firms. And this comes at a time when there is a real threat of global recession fueled by inflationary pressures and revenue headwinds. Consequently, indirect cost reduction is becoming a key strategic driver for many of the world’s largest organizations. Firms are realizing the importance of instilling a better insight over indirect spend and wringing savings from indirect spend categories.

Sweeping Leaves on a Windy Day

The organizational culture and landscape on the indirect side has many nuances that do not exist on the direct side. Procurement professionals therefore need to traverse the waters of indirect spend with unique skills in order to succeed. Just try to procure the same make and model of smartphone for everyone or change the catering company without considering end-users.

Compared to direct spend, indirect spend is often more diverse, made up of both tangible and intangible services and definitely more complex. Indirect procurement is constantly evolving. It is an ever-changing job, with new categories emerging and evolving all the time. And these new categories require different skills & address different supply markets.

Indirect procurement is marred with challenges, which are typically common across industries.

Distributed spend authority: Buying decisions are often dispersed throughout an organization with multiple cost centers incurring similar spend.

Three bids and a buy: Driven by ‘use it or lose it’ budget management mentality, the departments procuring indirect spend categories often focus solely on securing the right good or service as expeditiously as possible which is within their set budget. It is common for departments to select the lower price among a few quotes to move quickly without fully understanding what a service or good should cost.

“Sacred Cows”: Some indirect categories may be considered too sensitive for sourcing to tackle. As a result, businesses often completely avoid any opportunities for cost savings for fear of damaging staff and supplier morale and productivity or relationships with suppliers.

Poor spend visibility: Indirect procurement has to deal with the challenge of poor visibility. With common spend distributed across cost centers it is difficult to consolidate and get real time visibility of spend.

Frequent purchases: Indirect procurement involves purchasing products in low volume but frequently. Frequent purchases of wide assortment of goods and services result in less bargaining power and makes indirect procurement process resource-intensive to manage.

Challenges of standardization: Customer groups may have disparate preferences for products in the same category. Hence, strategic sourcing is time-consuming and complex, making it challenging to create homogeneous customer segments. Categories in the “indirect” group are remarkably diverse and do not fit neatly into specific criteria.

Specialist v Generalist & Specialist Discount

At the core of it, I believe, the difference in being a generalist as against a specialist. This debate whether the generalist or a specialist is a better performer is an old one.

Recent experiences in job market and career opportunities may indicate being specialized is advantageous to a person, however, that is limited just to jobs that require specific skill sets and experience. Also, in initial stages of their career, people with specialized profile tend to gain more job opportunities than those with generalized profile.

Merluzzi & Philllips argue that that a specialist discount may occur in contexts that share three features: strong institutionalized mechanisms to evaluate candidates, candidate profiles with direct investments that signal their value, and a high supply of focused candidates relative to demand. Dr. Fahrenkopf’s studies suggest, teams performed better with generalists as members than specialists, as generalist members are more likely to adopt new processes and thinking more quickly. A specialist, on the other hand, is considered an expert at a specific task rather than the entire process. Also, when collaboration of different disciplines is crucial, generalists tend to perform better. When employers have a strong screening tool to assess the quality of candidates, they prefer generalists who can provide greater diversity in skill sets and knowledge.

Indirect procurement prepares you as a generalist. Indirect procurement professionals develop a unique set of skills while managing spend that is often poorly recorded, loosely managed, widely dispersed, and generally messy or neglected. While it hones the numerate and analytical abilities, behavioral skills also come into the spotlight. Particularly important is the need to collaborate with stakeholders; influencing and listening skills, empathy, and ability to take initiative as well as being decisive when the need arises. It is all about building trust with stakeholders and suppliers to ensure continuity of supply and smooth operations.

A career in indirect procurement is more fulfilling than that in direct. Just ask an indirect procurement professional about the most bizarre thing they were asked to source, and they will be able to talk about several anecdotes; but most in direct may struggle to produce even one.

A Jack of all trades is a master of none, but often times better than a master of one.