Four Best-in-Class Ways to “Connect the Dots” and Improve Sourcing Results in 2015

Over the past couple of months, we have been featuring analysis from our recent report, The State of Strategic Sourcing 2014: Connecting the Dots, which is now out and available. Interested readers can find the report here and here.

As the subtitle of this research report implies, it is important for sourcing and procurement teams to “connect the dots” – not only among the distinct strategic sourcing sub-processes, but also inside and outside of the enterprise to maximize the value that they can drive through the sourcing efforts. As we begin to wrap up our analysis of this report, here are four Best-in-Class ways that sourcing teams can “connect the dots” and improve results in 2015.

• Link Strategic Sourcing Processes and Tools: Each of the four sub-processes of strategic sourcing – spend analysis, sourcing/eSourcing, contract management, and supplier performance management – is valuable in and of itself – but their value is maximized when they are linked, for the sum is greater than the whole of its parts. After pooling streams of spend data and distilling them down into valuable intelligence, sourcing teams can than apply lessons learned to make better, more informed sourcing decisions. They can then mate that intelligence with their supplier selections and carry them over to contract authoring and execution, ensuring that the potential value they identified will be fully captured by the enterprise. Finally, sourcing teams can ensure contract compliance by monitoring, measuring, and managing supplier performance – are they delivering the promised value? Is the enterprise realizing the value it identified when the bid was awarded?
• Prioritize Spend Analysis: Sourcing success frequently starts with spend analysis, for it is here that valuable lessons can be learned from historical spend information and incorporated into current and future sourcing events to improve the process and decision criteria while also improving the supplier’s understanding of the opportunity. In the age of big data (and for procurement, we mean spend data), it behooves strategic sourcing teams to categorize, cleanse, and analyze their spend data and distill it down into useful intelligence that sourcing teams can then action to make better decisions.
• Collaborate – Internally and Externally: Collaboration and convergence have been big trends in sourcing and procurement, particularly over the past couple of years. Sourcing teams can further connect the dots by harnessing the collective knowledge of internal stakeholders. For example, sourcing teams can work with product development teams to spec out products and determine what categories, commodities, or services the enterprise will need to develop a given product. Conversely, sourcing teams can leverage their suppliers’ market knowledge of unique, emerging, or scarce components or commodities. By collaborating internally and externally, sourcing teams can overcome steep learning curves faster and bring new products to market sooner.
• Track and Communicate Key Sourcing Metrics: Lastly, it’s important to take a holistic view of enterprise sourcing performance and look beyond traditional measures like realized vs. identified savings, or spend under management. The health of the enterprise is more than just what it saved year-over-year; it’s understanding (and then tracking and communicating) what else beyond savings was gained from the sourcing team’s work and also, what processes and tools were leveraged to drive the results.

Every year, the pace of business continues to increase and the bar continues to be raised for sourcing and procurement teams, who must continue to do more better with same. One significant and overarching way that sourcing teams will be able to rise to the challenge in 2015 is to “connect the dots” across their strategic sourcing programs. They can do this by linking processes and tools to work in harmony; by looping in all relevant stakeholders – internal and external – into the process; and by measuring a variety of metrics. Sourcing teams that can implement any or all of these measures will be on their way toward greater sourcing success in 2015.

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