Supplier discovery is the part of the sourcing process wherein sourcing teams research the supply market and identify a list of qualified suppliers that can provide goods or services to the enterprise. Although it can be an under-appreciated step in the sourcing process, experienced procurement and supply management professionals understand its importance: having the best suppliers come to bid can correlate with improved financial and operational results.
While it may seem less risky to simply renew contracts with existing suppliers rather than reengaging in the sourcing process, or even invite all of the suppliers who participated in the last round of proposals to participate in a new round, maintaining the status quo can actually increase risks to the enterprise. These risks can include higher costs, lower contract compliance, inferior quality or service, and missed opportunities to work with innovative suppliers that have unique or cutting-edge capabilities that could help the enterprise transform their operations. Moreover, supply markets shift; those suppliers that were considered Best-in-Class several years ago could be considered laggards today.
As a result of these risks, it is even more important for sourcing and procurement teams to conduct supplier discovery to ensure that they are working with the most qualified, capable, and cost-effective suppliers in the market, which has gotten smaller in the last quarter century. Regions and markets that were once off limits or out-of-reach are now accessible, increasing the number suppliers within the global market. To aid supplier discovery, here are three sourcing tools that can be leveraged during this process.
- Spend Analysis: These tools can help enterprise sourcing teams understand past and current spending trends – with either past or current suppliers – that will allow them to identify potential savings opportunities across different categories. Perhaps the enterprise is sourcing multiple categories from different suppliers and not taking advantage of bulk discounts or more favorable financing terms with one supplier that can source them all. Spend analytics tools can help enterprise sourcing teams discover these opportunities.
- eSourcing: Automated, electronic sourcing (eSourcing) tools allow sourcing and procurement teams to reach out to the supplier market and issue RFIs, RFPs, RFQs, etc., to begin a formalized sourcing event. Suppliers respond to these requests with offerings, which sourcing teams compare with each other and past/current suppliers using spend intelligence to determine best price, best terms, best value, and so on. From there, sourcing teams can select the winning bidder and move on to the contracting phase of the sourcing event.
- Business/Supplier Networks: Another tool that sourcing teams can use to aid in supplier discovery is business or supplier networks, which are online portals that connect buyers and suppliers to conduct business. Here, sourcing teams can search the network based on criteria (such as category, cost, location, timeline, etc.), and reach out to suppliers that fit their criteria. Procurement and suppliers can more directly and efficiently conduct business than engaging in the traditional sourcing process, saving them time on the front and back end of the deal (as business networks can also enable tighter linkage between procurement and finance).
Conclusion
While it may seem like a safer bet to remain with legacy suppliers when a contract nears expiration, it’s risky. And while it may seem like a hassle to explore the market for newer or more qualified suppliers when the enterprise is “happy” with the current one, more capable and cost-effective suppliers are likely out there, particularly since borders have fallen and territories have opened up in the last 25 years. Fortunately, sourcing and procurement teams have a few tools in their belts to help identify and engage with these suppliers for greater cost savings, performance, and reduced risk.
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