Welcome to another entry in Ardent’s hot “Summer of Sourcing” series of articles focused on all things sourcing. Today, we’ll deep-dive into the notion of visibility, and the multiple angles of visibility in which Best-in-Class organizations (those top-performing organizations from Ardent’s upcoming “State of Strategic Sourcing” research report) hold as part of their series of advantages over all other organizations.
There are many “cornerstones” to an effective strategic sourcing program (or overall procurement organization), from a proper contract management process to collaboration between key internal stakeholders to supply market knowledge. While every enterprise may have its own list of specific tent-pole attributes, the fact remains that visibility, especially in today’s age of intelligence and “Big Data,” may prove to be the most formidable of all cornerstones.
Visibility has long been highly desirable by progressive Chief Procurement Officers. Having proper visibility into enterprise spend and supplier performance? Then visibility is the gift that gives and gives and keeps on giving as the procurement/sourcing organization tries to transform or thrive in an uncertain business climate. Limited or no visibility into these aspects? Well, chances are that the procurement function is floundering and unlikely to pass (finance, treasury, etc.).
Ardent Partners’ latest research has discovered that in addition to the capability and performance advantages currently enjoyed by Best-in-Class organizations, these top-performers also report sharp gains in the visibility arena:
- Best-in-Class companies are 40% more likely than all others to hold visibility into supplier performance and supply risk issues, critical items that support the strategic management of an enterprise’s core supplier base. Supply risk is an ever-evolving threat; the average supply chain disruption (due to a natural disaster or financial event) that affects major suppliers can severely alter product development timelines, and concurrently, revenue streams. Visibility into how suppliers are performance, as well as current threat levels, can go a long way in gaining a real-time perspective on a company’s supplier base.
- Top-performing organizations are 40% more likely to hold visibility into booked savings across the enterprise. Most CPOs and sourcing executives are familiar with the concept of “savings leakage,” which occurs when negotiated and identified savings fail to fully materialize into the realized, booked and implemented realms. For some organizations, even a single savings percentage point (1%) could result in a loss of hundreds of thousands of dollars. Best-in-Class companies are adept at holding visibility into this arena as an effective means of avoiding the savings leakage problem before it occurs.
- Best-in-Class companies are also nearly 30% more likely than their peers to have full visibility into enterprise spend. As you can imagine, this is the “full monty” of sourcing visibility; full visibility entails a clear picture into all corporate spend, associated suppliers, key spend patterns / trends, and ramifications of that spending (cash management and enterprise finances). While visibility itself is a “cornerstone,” full visibility into enterprise is the “foundation” for Best-in-Class procurement / sourcing function.
