Sourcing Innovation Series

For any one that subscribes to this blog and understands our position on eSourcing, my contribution to the 2007 Sourcing Innovation Series should come as no surprise. However, I forge these opinions, not by being locked up in a think tank with no access to sunlight, but with direct contact with practitioners, both client and prospective.

**eSourcing and advanced optimization have merged into one entity**

There is no question over the last few years that eSourcing has gradually increased in sophistication and the user community has also embraced this increase beyond simply running reverse auctions. Strategic sourcing teams now regularly combine project management milestones and multi-stage eRFx documents into projects and do it without hesitation. However, we at Iasta have been professing for over two years to add advanced sourcing optimization to that arsenal of tools. I have witnessed this grow in acceptance and seen people that are new to eSourcing come to the table with a fundamentally higher level of understanding. Taking a complex bid, and automating more of the lifecycle, is critical to compressing the amount of time needed, and thus, allowing more bids to be strategically sourced by the same number of people.

Specifically, I see advanced sourcing optimization being the catalyst which merges the function of the general business analyst with the sourcing team. Traditionally, a complex bid would go through the sourcing process and immense amounts of data would be collected. This, in turn, would be shuttled over to the business analysts assigned to support procurement. In many companies, this process could take 6 weeks, and that is optimistic and assumes the Director gave a due date! The power that advanced sourcing optimization provides, allows the sourcing team to manage the analysis themselves. They can derive very detailed scenarios in a matter of hours, instead of weeks. It also frees the business analysts to concentrate on many of the requests that they are getting from other departments, such as finance. In one example we were involved with, the business analyst still was not done with the scenarios after 8 weeks on a $25 million dollar bid which had captured approximately 10% savings. This was not due to him not trying, but he had too many other requests to get done which competed with his time. This delay was costing the company $208,000 per month in lost savings by not completing the analysis and awarding the contract. Meanwhile, our team had developed the correct scenarios for the award decision two days after the sealed bid closed. Needless to say, the benchmark we provided made its point!

Essentially, an eSourcing tool that provides procurement more independence and autonomy from other departments makes them more nimble and responsive. They also know what is needed right away and do not have to go through painful translation exercises to get to a final conclusion that probably needs to be adjusted once it is reviewed any way. Doesn’t this all sound like a spend analysis vs BI/DW discussion, too?

From my point of view, I see the next year, or more, being a continued transformation of procurement to self sufficiency, which removes layers of inefficiency. This is a practical and attainable goal that best in class companies already experience.

One Response to Sourcing Innovation Series

  1. You are absolutely right, self-sufficiency is crucial to delivering value. If you can’t build your own models and your own spend cubes quickly and easily, then opportunities become limited to obvious and narrow ones.

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