The future of sourcing: Go Large or Go home!
The future of sourcing is uncertain in these times. The world continues to evolve into a global market place with organizations expanding its operation across geographies. Hence, when the size of businesses grows, the operations complexity also grows.
One peculiar aspect of this phenomenon that makes business leaders sweat the most is sourcing. Scale and complexity are directly proportional when it comes to sourcing.
The reasons for that are as follows:
- BU’s and territorial companies have different policies, processes, and constraints.
- Increased transportation cost and overheads
- Several territories resulting in complex supply chains because of international logistics.
- Difficulty in supplier collaboration and control
- Scattered spend and unrealized saving resulting in organizations not able to generate value from sourcing activities
From operationalizing automation to deriving strategic Value:
The procurement department across fortune 1000 companies are perceived as a strategic function through which an organization can achieve dollar saving rather than achieve cost avoidance. This shift has primarily happened with the advent of seasoned procurement professionals and technological breakthroughs made.
“Without strategic sourcing, we would not be able to improve cost, quality, and service levels while guarding against third-party risk.”
– SIG, 3 Sourcing and Procurement Trends for 2020
As expectations grow from the procurement function to deliver more, the process level and policy level innovations are evident. Therefore, procurement leaders continue to look at sourcing optimization as a means to generate results.
Some pressing needs of the market are-
- Consolidation of sourcing spends and events to ensure economies of scale and more control.
- Automated processes and compliance across business units and geographies.
- Automated decision making and analytical decision models that make action fast and easy.
Market need: “Intelligent” sourcing
Given the dynamic market need, technology partners are fostering the next generation of solutions to support every nuance of the sourcing process. These solutions are not just restricted to modern eSourcing tools. There are increasingly specialized tools like sourcing optimizers to support large scale sourcing tools.
· Central platform to manage the entire sourcing life cycle.
· Standalone tool works well for events to be conducted, which are strategic and medium in size. (<10,000 lanes)
· Limited Analysis capabilities restricted by time and manual process.
· Solution that works as an engine to support bid analysis and enable decision making.
· Combined with an eSourcing tool that can help scale events and create large scale events. (>60,000 lanes)
· The engine leverages structured data that automates the entire analysis process
By combining both the tools, it can unleash groundbreaking efficiencies and saving opportunities for the organization. As a result, more solutions are looking to augment existing eSourcing tools into end-to-end sourcing tools by accommodating point functionalities.
Realizing the benefits of sourcing
Solution vendors have identified the pressing market gap, and few pioneers have already combined technological prowess with deep process knowledge to craft the perfect solutions. Hence, the approach to identify what works for a particular organization is a simple assessment of realized value derived.
Let us dive into what value does best in breed process, and methods hold for an organization-
- Savings is a combination of all the value points mentioned below and the most important one. Hence, the ability to manage and collaborate better with suppliers plus tighter control over the process gives additional leverage to the procurement organization.
- This leverage helps unlock saving opportunities in the form of other discounts, cutting redundancies, reduction in overall cost across the sourcing life-cycle, which would otherwise not be available.
- Adopting best practices triggers a culture of identifying redundancies in a process and doing away from them. Modern eSourcing tools help to consolidate scattered sourcing events leveraging automation at all stages of the event life cycle. Also, with a reduction in manual intervention and repetitive tasks, you save a lot of time.
- There are clear advantages to consolidating spend via large scale sourcing events to leverage economies of scale. As the scale increases, the complexity also increases.
- Modern solutions can handle problems with powerful computing capabilities and leaner process flows. By using these solutions which have the ability to increase the scale of sourcing activities, buyers can unlock many savings opportunities.
- Process automation will be the next big trend across business functions, particularly in sourcing. Therefore, procurement organizations are focusing on identifying manual and labor-intensive tasks to find better methodologies of doing them.
- End-to-end sourcing and optimization tools substantially decrease the workload and let procurement professionals focus on strategic activities.
Business intelligence and analytics:
- Data backed decision-making is very important for procurement professionals, given the risk associated with sourcing and related activities. As a result, mining business intelligence and analysis proves to be a very time-consuming activity if done manually, costing businesses real money.
- Advanced optimization tools can take a complex problem as large as containing thousands of lanes and responses from hundreds of suppliers, process it, and generate results in just minutes.
Thus, sourcing is entering the next age of technological advancement because of the evolutionary forces of market and board room expectations. As a result, cost-cutting and identifying sustainable saving avenues are higher.
The opportunity is for the taking for procurement organizations to get the first movers advantage; the receptive technological organization will go beyond the curve and unlock new sourcing efficiencies.