In case you missed our earlier announcement, Ardent Partners’ The State of Strategic Sourcing 2014: Connecting the Dots has been published and interested readers can find the report here and here.
In the report, we introduce the idea that there are four primary “pillars” that mark the foundation of the modern strategic sourcing program – spend analysis, sourcing, contract management, and supplier performance management. All four are critical sub-processes of strategic sourcing that, when automated, can elevate a sourcing team’s performance and that, when connected, can transform an entire operation. Today’s article will focus on the second pillar, sourcing – as both a business process and an automation tool.
The Sourcing Process
For years, Ardent Partners defined strategic sourcing as “the process of identifying, evaluating, negotiating, and implementing the optimal mix of goods and services that best support the objectives of the enterprise.” But over the last few years, I’ve felt that this definition needed to evolve to incorporate the fast-changing business landscape and the steady progression of business process technology. As such, our new, core definition has been expanded to include both agility and business process automation.
Considering the speed and complexity of the modern business environment, and the leverage that smaller sourcing teams can wield with automated sourcing processes, Ardent Partners offers an updated definition for strategic sourcing: “Leveraging process automation tools to quickly identify, evaluate, negotiate, implement, and adjust the optimal mix of goods and services that best support the constantly evolving objectives of the enterprise.” This newer definition should allow sourcing teams to counter the hazards and threats that they may face in the modern business environment and grant them the speed and flexibility to meet market challenges now and in the future. And, to reiterate a major point that CPO Rising has been making since our earliest days (remember eSourcing 2.0) – a Sourcing program cannot be considered “strategic” if it doesn’t leverage business process automation tools, particularly eSourcing. This is, in fact, I’ve been making professionally now for more than 15 years.
[Sidebar: Recommendation for those CPOs and sourcing leaders who currently have strategic sourcing consultants working on sourcing projects without the use of an eSourcing tool and billing by the hour (a combination I find unconscionable in 2014): If you have to, go ahead and let them finish their projects by year-end, but tell them now that they cannot start any new projects in 2015 without leveraging technology directly on projects. And, please contact me if you’d like to discuss the why and how of this, including any strat. sourcing consultants.]
That’s right, to be “strategic,” sourcing teams in 2014 must leverage technology. A sourcing process that intentionally bypasses process automation can no longer be considered a truly strategic process. It fails to connect the sourcing dots and leaves an unfinished picture. Business process automation tools are central to the modern strategic sourcing program; they have been proven to help sourcing professionals better identify sourcing opportunities from within enterprise spend, select suppliers and negotiate contracts, increase contract compliance, and ensure greater supplier performance, among other things.
Of the different strategic sourcing technologies that support the primary pillars, our latest report found that eSourcing tools have the highest current adoption rate among all respondents with roughly 46% of all enterprises currently using the solution and another 30% planning to adopt it in the future. And, as determined by our latest report, the 61% of Best-in-Class sourcing teams are connecting the sourcing technology and process “dots” and use an eSourcing tool to drive their programs. This is an adoption rate that is almost 45% higher than their competitors. Of course, using eSourcing and using Sourcing well can be two very different things, but the first step to using the solution well is to actually start using it. Something I highly recommend to the 54% of procurement departments that are not doing so today.
RELATED ARTICLES
Spend Analysis: The First Strategic Sourcing Pillar
The State of Strategic Sourcing – Connecting the Dots
Research Preview: The State of Strategic Sourcing in 2014
The Four Pillars of the Modern Strategic Sourcing Program
