Manufacturers utilizing manual processes to source the direct materials that comprise their products have an extraordinary opportunity to leverage automation and drive great value across the enterprise. And yet, while the value proposition of an eSourcing solution is straightforward, articulating and presenting a business case for a solution can be complex, time-consuming, and difficult. To help procurement and sourcing executives and their teams accelerate this process, Ardent Partners has developed a robust “Business Case Framework” that includes eSourcing specific content, independent research, and easy-to-follow directions. Click here to read our “Introduction” article and last week’s “Executive Summary” article. This week in a two-parter, we cover “Background” as well as “Problem/Opportunity”.
Background
The reason for writing the Background Section is to provide the reader with an introduction to the sourcing organization and clearly explain the general business problems that it faces due to the lack of an automated sourcing process.
Our sourcing organization is staffed by X# of FTEs with X# dedicated to sourcing activity. Ardent Partners research has shown that the Best-in-Class organizations source 77% of their addressable spend every year. By comparison, last year we sourced X% of our addressable spend and saved X% on the average sourcing project. Ardent’s research also shows that those organizations that use eSourcing solutions can save up to 70% more on the average sourcing project than those that only use manual processes. Additionally, our level of collaboration with stakeholders is inconsistent and our engagement in the sourcing process is typically later than ideal; these issues place constraints on the value that we (and our suppliers) can add to the process and to our final products.
The Problem/Opportunity
This section should briefly describe the main business problems that the proposed project will address.
The current direct materials sourcing process is a manually-intensive one that reduces our overall efficiency, limits the number of projects that we can manage, and decreases the total savings that we can deliver from sourcing direct materials. Beyond that, the lack of an automated sourcing process prohibits an enterprise-level view into sourcing activity and makes it much more challenging to collaborate with internal budget holders and project teams to help them realize their strategic objectives. Other stakeholders are significantly impacted by this lack of visibility including:
- Product engineers who often struggle to find qualified suppliers early enough in the product development process to make major cost or innovation breakthroughs
- Product teams who lack the visibility into our current direct materials spend and are unable to leverage existing supplier relationships and internal expertise
- Strategic suppliers who are often forced to respond to inquiries and RFPs in a reactive manner and lack the visibility into our decision-making process that could help them improve their products and final bids.
An eSourcing solution that could be used to source direct materials will greatly increase the efficiency of the sourcing organization and it will greatly increase the impact that the team can have on business results, which include an enhanced ability to (1) collaborate with product teams in the development and refinement of their requirements (2) reduce product development lifecycles by collapsing the sourcing process (3) efficiently drive contracts to the suppliers who deliver the greatest value (4) leverage more spend with fewer suppliers to achieve greater cost savings (5) collaborate and communicate with strategic suppliers to improve our products while also reducing our costs (6) gain greater visibility into the market and ultimately reduce the total cost of ownership of each supplier contract.
RELATED RESEARCH
Creating a Business Case for Sourcing Automation – An Introduction
Creating a Business Case for Sourcing Automation – Executive Summary
