The last blog discussed the four core elements of strategic sourcing.
Let’s now look at the strategies for best-in-class sourcing organizations.
Ardent Partners defines Best-in-Class performance in this research effort as the 20% of enterprises with the highest annual cost savings and the highest percentage of addressable spend that is formally sourced.
Table source: Ardent Partners Report
As seen in the table, best-in-class sourcing organizations consistently outperform their competitors when it comes to many baseline performance and operational metrics. Specifically:
- Best-in-Class procurement departments manage 35% more enterprise spend – Spend under management is one of the most important, if not the most important, indicator of procurement success. Every dollar of spend that a procurement department can manage ultimately saves the enterprise additional dollars across the source-to-settle process.
- Best-in-Class sourcing teams save more. Full stop – Savings is a metric used most frequently by enterprise executives to judge procurement. The sourcing leaders that comprise the Best-in-Class far outshine their competitors in actual savings delivered, driving almost 40% higher average savings rates in the last year
- Best-in-Class sourcing teams also report a 35% higher percentage of on-contract spend, indicating that these teams drive more spending against established contracts with preferred suppliers than their peers.
- Best-in-Class sourcing teams place more than double the percentage of their addressable spend into a formal sourcing process each year. Formalized sourcing efforts leverage the main components of strategic sourcing (analytics, contract management, eSourcing, and SPM) to ensure that the highest value suppliers in the market are the primary sources of the enterprise’s goods and services.
Stay with me as in the next blog I look the capabilities of best-in-class organizations.
For detailed reading you can access the complete Ardent Partners report on The State of Strategic Sourcing by clicking on the download button below.