The speed and complexity of business has been increasing in recent years and shows no sign of slowing down. Globalization means that new geographies and supply markets keep opening up; innovative products and technologies hit the market every day and product life cycles are becoming shorter as a result. Opportunities to offer new and exciting products, increase market share, and reap handsome financial rewards are greater for enterprises, but so are the category and supply risks. Innovation and evolution across spend categories and suppliers continue, and the regular churn across each can put enterprise procurement teams at risk when trying to match the pace of their business. Incumbent suppliers that were on hand before to serve the enterprise may soon be obsolete or out of business tomorrow.
As a result, enterprise procurement teams should not go it alone when it comes to sourcing – they need to collaborate both internally and externally to mitigate these risks and ensure that the enterprise remains on its upward trajectory. For more than 15 years, the analysts at Ardent Partners have advised that collaborative sourcing, which blends traditional sourcing approaches with more robust category strategies, more penetrating views of supply markets, and deeper collaborative ties with suppliers, is how today’s supply management professionals will continue moving forward and preparing for greater innovation and market changes.
But before procurement teams can source more collaboratively, they’ll need a few insights, processes, and tools to start.
Three Prerequisites for Collaborative Sourcing
- Internal and External Visibility: Visibility into enterprise spend, upcoming business requirements and needs, supply markets, and supplier performance are basic building blocks of sourcing. Broadly speaking, visibility delivers insight into many facets of supply management – from spend across and within categories, to spend with certain suppliers, to contract compliance, to supplier performance, and many others. Lacking visibility into any or all of these supply dimensions can prevent sourcing teams from understanding where they “sit” with existing categories and suppliers and how they can all “stand and deliver” better performance and results.
- Analytic and Reporting Capabilities: Of course, a procurement organization cannot attain full visibility without possessing and leveraging analytical capabilities – like spend analysis, contract analytics, and supplier performance reporting. Spend analysis should serve as the foundation to any collaborative sourcing program (indeed, we believe it is one of the four “pillars” of sourcing). With spend intelligence, procurement teams can assess, identify, prioritize, and then execute the best sourcing opportunities. Contract compliance and supplier performance reporting capabilities are also significant, as it vital to understand whether and to what degree internal and external stakeholders are adhering to contractual agreements, and whether or if process improvements or relationship changes should be made.
- Automated, Holistic, and Standardized Processes: Before embarking on a collaborative sourcing event, procurement teams need to ensure that their processes can or will support more internal and external collaboration. They should take a holistic view of the sourcing process – internally and externally – and consider all stakeholder relationships, processes, strengths, weaknesses, and opportunities. A procurement organization that is aligned and tightly linked to internal stakeholders like AP, Legal, Operations, and Product Development, will be well-poised to implement standardized and automated processes to elevate sourcing operations to the next level. The same goes for its relationships with suppliers, which can more effectively help procurement teams stay abreast of market changes, supply risks, or opportunities to cut costs or increase quality and innovation.
Conclusion
Globalization and innovation have been increasing the level of competition in the market for years, and businesses across all industries and geographies feel the pressure to keep the pace. Fortunately, procurement teams can help enterprises stay ahead of the curve by more closely and effectively collaborating with stakeholders in and out of the enterprise. To do this, they’ll need to have visibility into the enterprise goals and needs while leveraging analytics and reporting tools to provide them with maximum visibility into many facets of their business – enterprise spend, contract compliance, and supplier performance. And they’ll need to ensure that they are equipped from a process standpoint to more closely and effectively collaborate with key internal stakeholders and suppliers to not only keep moving forward, but to also elevate the enterprise to the next level.
If you’re interesting in collaborative sourcing, you may be interested in a tomorrow’s webinar on a similar topic. Join Ardent’s Chief Research Officer, Andrew Bartolini for a June 17th (2 pm ET) webinar sponsored by Puridiom when he presents the findings from his upcoming report “Collaborative Procurement: Using Relationships to Drive Influence and Results” – Click here to register.
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