Evolving beyond savings.
Last month we concentrated a lot on looking at the ways (and why’s) procurement teams can and should be more supplier oriented. Not surprisingly, that supplier-centrism also applies to your strategic sourcing processes. That requires a holistic focus to integrate analytics, contracts and supplier information, and the technology to make it work.
Sourcing technology has come a long way over the years — and continues to change rapidly. While its beginnings initially focused primarily on auctions and RFx, today strategic sourcing efforts can provide a much more comprehensive and integrated view of your supplier base.
A big part of what’s driving this development is the change in the endgame for procurement, and how procurement continues to shape its role — and influence — in organizations.
To be sure, managing cost is and will always be the primary motivating factor for procurement. In fact, from one study to the next year after year, it’s never surprising that managing costs is still the KPI for how procurement organizations are measured (and how many measure themselves).
69% of the respondents in a major analyst survey a few years ago ranked the reduction or avoidance of purchase costs as one of the top priorities. But it ranked 2nd to elevating procurement to the role of trusted adviser. So how do you elevate the role of procurement beyond savings?
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. This is true for not only cost savings through traditional-but-still-effective sourcing efforts like eRFx and auctions, but also in improving the overall elements of “modern” strategic sourcing. These mandates include:
Driving bottom-line results based on value
- Understand spend behaviors through embedded analytics, decision support and reporting capabilities
- Lead the organization to make TCO based supplier selection decisions
Improve compliance in all supplier interactions
- Own the supplier on-boarding process to ensure only properly vetted suppliers have entry
- Utilize CLM to enforce corporate policies in all contractual relationships
Collaborate with suppliers while reducing risk
- Create positive supplier relationships with technology and process for improved savings
- Drive insights with a complete focus on supplier information and performance management
All these efforts, when done right, can lead to positive ROI outcomes that ultimately achieve procurement’s main goal of improving influence in the organization. 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, a concern that CPOs continually highlight from year-to-year as a top driver for success.
If you’d like to learn how your procurement organization can leverage a supplier-centric approach to improve business outcomes, schedule a personalized demonstration of Strategic Sourcing on the Determine Cloud Platform.