Tuesday 3 September 2013

What’s Next in Sourcing Excellence? Agility’s the Word...

By Mickey North Rizza

There’s not a lot of debate about the value strategic sourcing plays in driving cost-savings. Best-in-class sourcing organisations, talked it about in our recent blog, use strategic sourcing to drive almost 12% in year-over-year cost reductions, vs. others who average just over 3%.
Having proven it works, what’s next then for the discipline? Beyond speed, or volume, sourcing organisations will be differentiated by agility, or as defined by analyst Andrew Bartolini of Ardent Partners, sourcing quality.

In the July 2013 report “The State of Strategic Sourcing 2013: Speed is Good, Agility is Better,” Bartolini outlines the next model for sourcing excellence. What’s different? Procurement organisations move from a tactical position of driving more value from suppliers for less money to one where
Procurement engages with a wide range of organisational leaders to align sourcing strategy directly with business strategy,
The scope of sourcing events increases to include large, multi-functional strategic projects, and
Rigorous processes provide a framework to streamline tactical sourcing events and guides more nuanced approaches that allow for flexibility based on the strategic nature of each opportunity

The change has fueled a business environment where volatility combined with ever-shrinking product lifecycles don’t leave of wiggle room for missing opportunities. Wondering how agile your sourcing organisation is? Ask yourself:

Are we using e-sourcing technology to improve all aspects of our sourcing process?
What kind of spend intelligence are we capturing and how well are we applying it to sourcing decisions?
How far way are we from a fully integrated source-to-settle process?
What’s our talent profile today? What do we need for tomorrow?
How collaborative are supplier relationships?
How fragmented is our approach to sourcing? What can we do to apply strategic sourcing to more aspects of our business?

When sourcing moves from a volume-centric model, to one where sourcing supports larger business objectives, there’s cost savings, yes. But there’s more. When procurement engages with finance, marketing, product development, and more there’s significant positive impact on all aspects of the business, including:
Working capital effectiveness
Acceleration of new corporate strategies
Lower risk when expanding into new markets
More accuracy in demand forecasting

Check out the report The State of Strategic Sourcing 2013 to learn more about how sourcing agility translates into sourcing excellence and how you can leverage what some of the best and brightest are doing to make agility-based sourcing work in their organisations.

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