Ardent Partners believes that there are “four pillars” that should serve as the foundation for any strategic sourcing program. These are the primary sub-process areas that drive all sourcing activity – spend analysis, sourcing, contract management, and supplier management. By themselves, each pillar can play a critical role in helping a team properly source a business requirement. And yet, when all are logically combined and leveraged in total, the whole can be much greater than the sum of its parts.
What follows are the “four pillars” of strategic sourcing that are foundational to any strategic sourcing program.
1. Spend analysis is both the process and the tools by which sourcing teams gather spend data, analyze it, and derive smarter spending decisions from it. When you understand your historical spend – where you spent it, how you spent it, with whom you spent it, whether you paid in cash or leveraged favorable financing terms, etc. – you can make better spending decisions on future purchases. Automated spend analysis tools pull all this data in a repeatable way into a regular reporting format in a that can be analyzed by sourcing professionals for faster decision making.
2. Automated sourcing (eSourcing) allows companies to complete the entire source-to-settle process within one consolidated system, wherein they can identify, evaluate, negotiate, and implement goods and services needed for a given sourcing project. Enterprise procurement and sourcing teams can pull in spend intelligence to help them inform sourcing decisions, and increase the likelihood that they will receive the optimal mix of goods and services for the best possible price. Reverse auctions allow vendors to bid down on contracts, and help sourcing teams ensure that they are getting the best possible value on the goods and services to be delivered.
3. Contract Management systems act as a single system of record for all contractual documents and enables easy retrieval for fast reference by internal stakeholders. Contract management as a process is central for contract compliance, as procurement staff can reference service-level agreements to ensure that suppliers are providing the goods and services as defined by the contract, and are charging the the agreed upon price for the goods and services delivered. Contract management systems help preserve the value derived by procurement through the sourcing process. These tools also allows contract managers to maintain templates for future use, which also aides in compliance and can also enable faster processing times on future contracts.
4. Supplier Management encompasses a wide range of activities related to managing relationships with suppliers. This includes supplier onboarding, performance evaluation, and risk management. Effective supplier management can help companies ensure that they are getting the best possible value from their suppliers, while also mitigating risks and building strong partnerships.
Together, these four pillars of a modern strategic sourcing program enable Sourcing teams to identify and realize greater cost savings, greater contract compliance, greater spend under management, greater on-contract spend, and greater spend through sourcing. There are clear advantages to automating strategic sourcing business processes, and savvy sourcing teams have already caught on how they can do better than their peers.
If you are considering an investment in strategic sourcing, Ardent’s new report — The 2024 Strategic Sourcing Technology Advisor Report — can help you navigate the landscape. Note that for a limited time, purchase of this report includes a 90-minute briefing session with the report authors Magnus Bergfors and Andrew Bartolini.
