Procurement professionals are continually asked to find new ways to generate value, cut costs and make their organizations leaner and more efficient. While somewhat effective, the majority of procurement organizations are still leaving a lot of value on the table since they take a tactical and transaction approach to sourcing.
Consider the criticality of taking a more strategic approach: According to Michigan State University experts, “in an evolving global marketplace, using strategic sourcing tactics to identify the best suppliers can help companies maintain efficient and effective supply chains across all company divisions and partners.”
Simply put: organizations that use strategic sourcing techniques save, on average, more than 10 percent more than their industry peers – and have a direct impact on the entire organization.
On the other hand, transactional approaches award bids based on the lowest price, with no consideration of supplier risks, supplier value management and long-term financial impact. But given the demonstrated value, why are so many procurement organizations still using tactical and transactional sourcing approaches? The answer: strategic sourcing is viewed as complicated, tedious and time-consuming. The reality: that is no longer the case – and hasn’t been for years.
For today’s modern procurement team, eSourcing and sourcing optimization technologies are critical elements for successful projects because they offer automation and increase savings opportunities – all while taking the complexity and resource-intensive nature of strategic sourcing out of the equation.
Andrew Bartolini, Chief Research Officer for Ardent Partners states: “Our definition of strategic sourcing includes a technology component. We define strategic sourcing as the business process that leverages process automation tools to quickly identify, evaluate, negotiate, implement and adjust the optimal mix of goods and services that best support the constantly evolving objectives of the enterprise. Any business process in 2016 that intentionally avoids process automation cannot reasonably be considered strategic in nature.”
In other words, if you are not relying on procurement technology that automates the evaluation and decision-making process, you are leaving substantial value and money on the table.
Today’s optimization-based sourcing technologies are designed to help companies collect and analyze hundreds of bids, expand the number of spend categories and ultimately compute the best outcome all in a matter of minutes – not weeks. At the core of this technique is decision optimization –analytical algorithms that help determine the absolute best outcome, no matter the amount of permutations or combinations. Ultimately, optimization technology quickly evaluates thousands of combinations to identify the best outcome for the business. It’s far cry from transactional sourcing approaches, which rely on the manual evaluation of a small number of bids, scenarios and suppliers.
If you are still taking a transactional approach, transformation to a strategic sourcing approach is actually easier than you may have been led to believe. And you can take your sourcing events beyond basic analysis and reduce the complexities of evaluating more supplier inputs to enable greater savings while not squeezing your suppliers.
By leveraging the right combination of technology, new sourcing techniques and supply chain expertise, sourcing teams can uncover more savings while meeting the needs of their stakeholders in a fast and efficient way.
To learn more about taking the next step, watch the OnDemand Webinar: How Can Your Sourcing Team Can Evaluate Hundreds of Bids… In Minutes Not Weeks… to Get More Savings?