6 Strategic e-Sourcing Best Practices

This post first appeared on ESF on August 29th, 2007.

There are a number of organizational, strategic, and tactical best practices that can be used to enable your e-Sourcing efforts. Applying best practices can often make the difference between a successful effort and an unsuccessful effort. Here are six best practices to get you started.

  • Form a Dedicated Team
    Form a dedicated sourcing team, lead by a senior officer, who follows generally accepted project management principles and processes. Truly successful strategic sourcing projects are never done on an ad-hoc or stand-alone (after-thought) project basis.
  • Focus on Compliance
    Companies lose large amounts of money through leakage – stakeholders do not order from the correct vendor (maverick spending) new pricing is not universally rolled out, and overbilling is not detected, for example. Successful organizations align processes, systems, and incentives to ensure compliance with sourcing plans and adopt procedures, systems, and metrics to measure internal and external performance.
  • Engage Stakeholders
    Engage all relevant stakeholders throughout the organization for each appropriate spend category in sourcing strategy development and constraint identification. Be sure to outline the goals, requirements, timeframes, and communicate these to internal stakeholders and external suppliers.
  • Encourage Supplier Innovation
    Innovative suppliers can improve processes and find new savings opportunities. Support supplier creativity through flexible bidding methods with advanced cost models, category strategies for future cost reductions in key categories, and strategic relationships.
  • Develop Meaningful Performance Incentives
    People are the most important part of any supply chain. Be sure to offer appropriate financial rewards based on TVM-based metrics based on measurable goals and objectives.
  • Use Decision Analytics Up-Front
    Use advanced decision analytics up-front to address sourcing strategies, demand management, and initial product design where as much as 80% of the final product costs are locked in. These tools should allow flexible bidding and allow for realistic comparisons on otherwise “apples to oranges” comparisons through appropriate weightings, metrics, and transformations.

For (at least nine) more e-Sourcing Best practices, see the Strategic e-Sourcing Best Practices: A Total Value Management Perspective wiki-paper over on the e-Sourcing Wiki. In addition to more best practices, it also reviews the Total Value Management approach to e-Sourcing, common barriers to success, and technology enablers.

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