A guide to indirect spend #2: IT consumables
Last week we began our series of blogs looking at indirect spend categories with office supplies. The category up for review this week is IT consumables.
You might wonder why I am focusing on this category this week, as many companies consider it to be the same category as office supplies. But I believe the pursuit of best value for any big spender on IT consumables can be best achieved when it is treated as a category on its own. This is because the IT consumables market has a ‘personality’ of its own that can only really be leveraged when sourcing is in isolation to general office supplies. Constant price fluctuations on these global technology commodities driven by demand, manufacturing capacity and input prices makes this a complex category, requiring close attention.
Faced with a myriad of choices and options, sourcing teams must take special care to distil down to the right product shortlist and suppliers. The use of e-sourcing and e-auctions can simplify this process of supplier and contract choice across many standard variables that must be properly explored, for example core and non-core item splits and single or multiple supplier routes across a wide range of products.
Printer consumables alone offer the options of OEM, compatible or remanufactured products. And the choice of ink or toner needs to be considered alongside hardware options to accurately ascertain and compare total price per page offered from different solutions. Most organisations have significant scope for standardising their printer hardware and this is also one way of reducing the number of print consumable variants and consolidating budgets. If evaluating remanufactured products, the inclusion of the recycling value of spent cartridges should be factored into the sourcing process too.
In other sub-categories – such as memory devices and storage media – standardising to a limited range of products, tendering bulk orders, ensuring demand management and considering grouping linked products are all valid options. With the potential for price fluctuation in IT consumables sourcing teams must also keep a close eye on market forces throughout.
Separating IT consumables as a standalone category can be a wise choice for large consumers. You really need to play this market individually based on its scale of choices, fluctuations in demand and pricing, and also consider your organisation’s carbon agenda as part of the approach.
☛ Temeena Hussain is a sourcing consultant at Wax Digital. Next week: IT hardware
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Some nice comments above. However, don’t discount running an Office Supplies tender and an IT Consumables tender in parallel. There are some key advantages to be had, such as volume leverages, supplier and e-catalogue rationalisation, consolidated deliveries etc. The supply pool can be very similar, although Temeena is correct in that they are two separate market-facing categories.
Consider then to run a tender whereby Lot 1 is Printer Paper, Lot 2 is IT Consumables, Lot 3 is General Stationery, Lot 4 is Office Furniture, and so on. Invite the suppliers for each market-facing category, i.e. invite the specilist printer paper suppliers, the specialist IT Consumables suppliers and so on. They shall bid for their key elements and promote increased competition amongst the generalists who can supply everything. One auction or RFQ can be run for the whole requirement, which is more efficient. Once the bids are in, you can assess which Lots to award to which suppliers to find the optimal groupings.
Use trials (free if possible) to measure the impact of switching to any alternative brands/makes/models of product that suppliers may have offered you as part of the tender. Use the trials to look for the total lifetime cost of things like printer catridges. Whilst one alternative cartridge may cost a fifth of the OEM equivalent, if its print output is a tenth of the OEM then you should not make this switch. Likewise if your alternative printer paper keeps jamming.
Hope this helps and look forward to the next one!
Most of the cost savings that can be achieved in replenishing printer supplies comes from optimising the supply chain itself. In almost every situation printer supplies are replenished on a reactionary basis, when printers alert users, or when the last cartridge is used. The average company with 50 printers will raise 8 purchase orders each month, costing around £50 each to process the transactions through the business. This cost and the cost of multiple ‘next day’ shipments can be reduced by 80% by using a supplier which forecasts and automates the supply chain using a KanbanMPS printer supplies replenishment portal. In some cases suppliers have fully automated the supply chain to include their distributors so that demand is planned through the entire process.