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August 31, 2015

eSourcing – what does it take in the modern economy?

Sourcing technology over the years has come a long way. While its beginnings initially focused primarily on auctions and RFx, today strategic sourcing efforts can provide a much more comprehensive and integrated view of the supply base.

What can be attributed to this development over the past decade is the change in the endgame for procurement, and how procurement views its role in the proverbial organization.

Don’t get me wrong, managing cost is, and continues to be, the motivating factor for procurement. In fact, from one study to the next, it is never surprising to me that managing cost is still the driving factor for how procurement organizations are measured.

Case in point: 69% of the respondents in Hackett’s 2015 Key Issues Study ranked reducing/avoiding purchase costs as a top priority. But cost reduction ranked 2nd to elevating the role of procurement to a trusted adviser. So let’s examine this for a moment…How do you elevate the role of procurement?

Today it’s all about having access to the right information at the right time, and being able to effectively share this information with both internal and external stakeholders.

Furthermore, with studies pointing to a positive correlation between cost reduction savings and supplier management maturity (for both direct and indirect spend), effectively managing suppliers has become the name of the game for becoming a trusted adviser.

As a result, while research continues to point towards managing costs as the motivating factor for sourcing and procurement, the business landscape has changed such that whom you source from requires more than just three bids and a buy.

Moreover, the ability to easily connect the dots between spend data, suppliers, contracts and sourcing is essential for not only cost savings through traditional and still effective eSourcing efforts like eRFx and auctions, but also in improving the overall elements of “modern” strategic sourcing, which include improved:

  • Sourcing insights based on self-service and collaborative analytics
  • Supplier participation in RFx or auctions through platform ease of use
  • Supplier information collection efforts based on common supplier and sourcing information frameworks
  • Compliance and obligation management against supplier contracts

All these efforts, when done right, can lead to positive ROI outcomes that ultimately lead to procurement’s main goal of having improved influence in the organization for procurement. But getting there is another story.

According to Ardent Partners, among the main obstacles holding procurement back is lack of the proper technology infrastructure and the challenges of aligning processes and systems; areas that have increased concern in CPOs since last year. Moreover, according to their recent research, 53% of CPOs noted new (or improved) technology as a top driver for success.

To get deeper into concepts of modern strategic sourcing and what it takes today, watch our on-demand webinar with Andrew Bartolini, Ardent Partners Managing Partner and Chief Research Officer, on how eSourcing has evolved into a strategic advantage.

Review industry trends and forecasts to learn how sourcing professionals can beat the competition when they embrace a  “supplier-centric” approach.

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