Have you ever noticed how many professional biographies mention complexity? It seems like everyone is handling “complex” litigation or “complex” commercial transactions or helping clients drive home “complex” projects.
In the sourcing world, most of us think of ourselves as handling “complex” sourcing. A fair question to ask then is, what does “complex” mean in this context? And, does it matter?
The short answer to whether the term “complex” matters in sourcing is that it should, and it is worth taking a few minutes to think about.
The University of Tennessee has adopted a model for sourcing that puts projects on a continuum from simple to complex. Adopting that model for our purposes, it is helpful to think of “noncomplex” as something that can be completely described in a contract and is supplier agnostic. The go-to product for illustrating this is the unassuming number 2 pencil. As long as you can describe the pencil completely (lead hardness and consistency, color, length, diameter, and size, etc.), it doesn’t matter where you get the pencil. All that really matters is the cost. Once you sign your supply contract, as a buyer, you can just sit back and check the boxes of pencils when they arrive to make sure they comply with their specifications.
That is an example of noncomplex sourcing. No matter how complicated a product may be, as long as it can be completely described in the contract and is supplier agnostic, it would not be classified as complex sourcing. This doesn’t mean that the arrangement may not be very complicated and require tremendous expertise or that there aren’t sophisticated tax, compliance, or other aspects to the purchase. It does mean, though, that the seller knows what it has to do from simply reading the contract and that the seller does not have to rely on the buyer to meet the engagement’s objectives.
Contrast such an arrangement with an outsourcing or consulting arrangement that hires a writing tool company to work with you to increase your employees’ writing efficiency.
In this case, the company will have to interview people, study work habits, understand work objectives, and develop a recommendation for a product or method that the company can deliver and that must be adopted by the company’s employees.
This requires quite a bit of work on the part of the buyer as well as the seller. And that means that the seller will need very different skills than the number 2 pencil manufacturer from our “simple” example. In this example, if the buyer’s people were to become recalcitrant or defensive, the seller will not be able to collect the information required to recommend a solution. Even if the buyer’s employees are cooperative and forthcoming during the evaluation part of the engagement, they can sink the whole project by simply refusing to adopt the resulting solution. In either case, the engagement will not be successful no matter how smart or technically proficient the seller may be.
This is a simple example of a complex deal. Again, the complex nature of the deal is because of the complexity of the product being bought or sold; rather, it is because the buyer and the seller each have to contribute to the outcome to be successful.
Reviewing various projects along these lines and grouping them accordingly can be interesting and useful. Some projects may have both complex and noncomplex components. For example, in a technology project that requires a license and implementation, the license may be noncomplex and the systems integration work may be complex.
We will discuss the contractual ramifications to these classifications in a later post.