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- March 17, 2015
- Andy Chiang
If your supply chain looks the same in 10 years as it does now, you’re going to be in trouble, says globally recognized sourcing expert Andrew Bartolini. Why? Markets are moving fast, and products are becoming commoditized faster than ever before. Strategic sourcing can be a critical competitive differentiator.
And, the only way to be strategic is with e-sourcing software. Bartolini goes so far as to say that if you are doing sourcing without e-sourcing software, you cannot call it strategic sourcing.
I’ll put my stake in the ground right next to his. E-sourcing software makes all the processes associated with sourcing efficient and scalable, so you can source even more categories, and still have time to be strategic. Yet, even a lot of large companies I’ve worked with still do paper based sourcing. No matter how good your team or process is, it’s simply no match for what can be done with modern e-sourcing tools. Without them, you’ll stay mired in antiquated processes and fall behind your competition.
Let’s define e-sourcing: Sourcing using email, Excel, Word and shared documents cannot be considered e-sourcing. Yes, those are electronic tools, but they’re not particularly well suited to sourcing.
E-sourcing software is purpose built for the specific workflow of sourcing. It lets you easily aggregate information, protect company knowledge as people come and go, and create repeatable processes.
The most sophisticated e-sourcing software integrates into the procurement system to go beyond process automation and provide intelligence that helps you identify new opportunities and get more mileage out of the contracts you’ve negotiated.
New cloud companies are making e-sourcing software more cost-effective and easy to implement than ever, bringing automation within reach of more organizations, so it’s time to think about doing things differently than the way you’ve always done it. Today’s e-sourcing software lets you:
1. Cast a wider net
Because e-sourcing software makes processes more efficient and scalable, you and your team can start to get more strategic. Rather than spend time on the mechanics of sourcing (e.g. collecting bids into a spreadsheet for evaluation, notifying suppliers of deadlines), sourcing professionals can use their time focusing on strategy. You can widen your net, including more vendors and sourcing more categories than with manual processes.
The other way you can widen your net is by letting your end-users run very simple “3 bids and a buy” sourcing events without any training or assistance from the sourcing team. Today’s software is so easy to use you don’t have to be a pro to run an event. Both the strategic sourcing team and business users can be more efficient in finding cost savings for the organization. If your organization is on the cutting edge, you might even train some of your business users to run reverse auctions and be prepared to see some eye opening savings.
2. Improve supplier relationships
You can invite more suppliers, and e-sourcing software makes it easy for them to participate by only requiring one thing of them – an Internet connection. The best platforms won’t charge supplier fees or require registering on a network.
An e-sourcing platform brings consistency to the process, making it easier for suppliers to participate. It also provides for a much more transparent process. Everyone has equal access to information, eliminating suspicions of bias. All this leads to higher supplier participation and lays the groundwork for better relationships, both of which bring more value to the buyer.
3. Harness the power of the collective
Being strategic means scanning the horizon for sourcing opportunities. With integrated e-sourcing software that’s connected to all your company’s buying activities, you now have intelligence about past, planned and in flight purchases so that sourcing managers can be alerted about where to look for more sourcing opportunities.
For example, some department outside of headquarters all of a sudden orders 100 computers. It's under the threshold for procurement to look at, but it's a big enough spend that it might make sense to run a sourcing event to get better pricing. With an e-sourcing tool that's integrated, you could be alerted any time there’s an order over a certain value and stop the requisition before it gets to the supplier so that the sourcing team can come in and say, "Hey, can we spend a little time with you and source this to get you better pricing?"
Or, let’s say your system is integrated with expense management, and you start to notice a lot of people expensing the same new keyboard. Now you have an opportunity to source it and put it in the catalog at contracted pricing instead of having everyone buying it at their favorite store.
4. Integrate for scalability
The other advantage of an integrated e-sourcing system is on the back end, where you can easily flip the winning bid from a sourcing event directly to a requisition, contract, or catalog item. You don't have to retype everything to load into the catalog, or create a separate requisition or contract. You just push a button and all that information carries over.
For example, you could negotiate pricing for your entire office supplies catalog in your e-sourcing software, and then with a push of a button bring the new pricing right back into the catalog for your end-users to purchase from.
Even if you think you don’t procure a lot, or even if you’re already getting some savings, you could be getting so much more with e-sourcing software. And your people, instead of doing the work of calling and emailing and cutting and pasting and compiling can instead be doing more strategic activities.
E-sourcing software can help you transform sourcing from a back-office function to a source of competitive advantage. You can’t really be strategic without it.
Andy Chiang is the product manager for Coupa Sourcing and our resident expert on reverse auctions. He also enjoys sourcing honey from his home apiary. Prior to Coupa Andy worked in strategic sourcing and supply chain at Gap Inc.