How Sourcing Can Respond in Dynamic Markets to Drive Supply Chain Value
Is the traditional way of sourcing outdated? What are the limits of focusing primarily on cost when it comes to creating value across a business?
These questions, among others, were recently explored in a recent conversation between Supply Chain Now hosts Scott Luton and Greg White, and Director of Product and Segment Marketing at Coupa Ahmad Jiwani. The speakers also discussed the tough environment sourcing and procurement leaders are facing, why it’s more important now than ever to choose suppliers carefully, and how technology can help optimize sourcing to unlock more value such as efficiency, quality, and improved brand reputation and customer satisfaction.
In the midst of dynamic and volatile market economics, it turns out that the traditional model of sourcing may end up being the more costly way of doing business.
“It all starts with sourcing” — and other key takeaways
Sourcing leaders are being asked to lead and create additional sources of value and work more effectively with suppliers. According to the speaker, sourcing is the foundation upon which supply chains are built, which means it’s even more important to unleash sourcing’s full potential.
Here are some of the key takeaways from the discussion:
Outdated strategies and processes are holding companies back
Several issues are holding people back from unlocking sourcing’s full potential:
- Not seeing sourcing as a driver of value
- Manual methods of identifying and bringing sourcing opportunities to market
- Cost-centricity without thinking of the bigger picture
When companies focus on per-unit cost alone, they run the risk of losing sight of the bigger picture, which could cost them more in the long run. But when companies look to sourcing not just to cut costs, but to build partnerships, build resilience, improve the quality of goods and services sourced, speed up the pace of play, and more, everyone benefits and business continuity improves.
On top of this, outdated manual methods (like relying on spreadsheets) slow down processes, make complex sourcing events more difficult, and increase the likelihood of organizations working in silos, which reduces efficiency and cost-effectiveness.
Sourcing and procurement organizations must adopt a holistic, collaborative approach to stay competitive
Sourcing must embrace a holistic approach and embrace suppliers as an important part of creative sourcing solutions.
A holistic approach includes thinking about total cost, inclusive of service levels, delivery risk, sustainability ratings, quality, performance, and more. It is also a collaborative approach, which means suppliers and other key stakeholders should be involved in the process. Sourcing teams can provide suppliers with feedback, create a transparent scoring process, and work with suppliers to come up with creative solutions, such as identifying areas to reduce cost, substitute materials, and maintain or improve quality.
Importantly, these approaches and processes should be clear, repeatable, and aligned with other departments across the business so as not to lose potential opportunities, value, and money.
Embrace technology to make sourcing faster and more efficient
The speakers discussed how spreadsheets and other manual methods function more or less as electronic notepads, and aren’t adequate for today’s dynamic markets. This is because by the time data is gathered and processed, it’s already obsolete. It becomes a lens into what organizations should have done, not what they should do now or going forward. These methods may also be prone to error.
For many sourcing events, especially the more complex they get, there may be dozens or hundreds of data points to consider, which may include supplier attributes, criteria that place constraints on the bid, and ideal award scenarios, all of which may go well beyond the capabilities of manual processes. But leading organizations embrace technology or digitalization of their sourcing to launch sourcing events, invite bids, and employ sophisticated optimization techniques. Coupa has found that companies that do this often uncover double-digit percentage savings from sourcing events.
The right technology creates visibility and enhances agility and consistency even with complex sourcing events. As more and more companies must balance cost, reliability, ethics, and speed, they need to embrace technology and digitize these processes.
Unleash the power of sourcing
When companies embrace these approaches and technologies, they can uncover double-digit savings while reducing risk and gaining a competitive edge. Every sourcing decision can either create or alleviate risk for a brand. Every sourcing decision can either strengthen or weaken relationships with suppliers, and help your business gain or lose value. But, as the speakers mentioned, “it’s not a zero-sum game.” It’s not necessarily true that better vendors come at the risk of speed, cost, or quality. And when suppliers are embraced as true partners, they can help an organization fully unlock and unleash sourcing’s power.
