The 2nd Sourcing Innovation Series ReCap, Part II

First of all, here are the posts to date.

The Future of eSourcing – Less is More Alan Buxton
The Future of Sourcing: Results-Based Process Specialization Charles Dominick
Sourcing Innovation Series David Bush
The Future of Spend Analysis Eric Strovink
Sourcing Innovation Series: Wither Procurement as Strategist in 2008? Jason Busch
Future Purchasing: The Extended-Enterprise Connector Jean-Philippe Massin
Yes Virginia! There is more to e-procurement than software! (Part 1) Jon Hansen
Yes Virginia! There is more to e-procurement than software! (Part 2) Jon Hansen
The FOSS(ilization) of the supply chain: The risks of a strategy centered on Free Open Source Software Jon Hansen
What’s Next in Purchasing? Ask Your Supply Management System Tim Minahan
Trading on the Spot Market the doctor
Let’s Get Analytical! the doctor

In Part I, we reviewed what Alan, Charles, David, Eric, and Jason had to say. In this part, we review what everyone else had to say.

Jean-Philippe Massin told us the future lied in the Extended-Enterprise Concept. In Purchasing, the trend will be towards industrialization, commoditisation, and automation; specifically, sell-side vertical e-Marketplaces with a commodity focus will become more numerous. These e-Marketplaces will feed globalization, only top performers will survive, and the purchasing department will evolve into a business in the extended-enterprise, managing the aggregation of independent top-performing companies in the network that work together to supply products and services as effectively as they can. The purchasing function will start to look more and more like trading as purchasers of the future will need to digest hundreds of parameters in order to forecast performance, select the best option, and change suppliers at breakneck speeds to maximize their company’s performance.

Jon Hansen offered a trio of posts that told us there is more to e-procurement than software and that strategies that centered on free (open source) software were fraught with risks. In his first post he points out that process, and not technology, is ultimately the main force behind successfully achieving results in terms of efficiency, spend rationalization, and spend reduction and indicates that he believes this will continue to be the case. In his second post he pointed out that achievers have more faith in their own team’s ability to understand and assess what needs to be done and that he does not expect this to change. In his last post he emphasizes that even though it’s not the technology, one still has to be careful of the technology chosen as the wrong technology can be fraught with risk. In the case of free open source software, there is the lack of imputability when software is developed via internet collaboration.

Tim Minahan, extending a train of thought started in a post by Brian Sommer, notes that we have not yet begun to tap the true value potential of supply management software. Future systems will address the major shortcoming of today’s systems, which is that systems today don’t help people make the decisions they struggle with before they enter data on a screen. Tomorrow’s systems will enable new processes and guided analytical scenarios that were previously considered impossible due to fragmented procedures, insufficient communications and data access, and inconsistent skills. They will guide buyers – regardless of skill set – toward the right sourcing and supplier management decisions. True innovation will come with technology that can inform buyers (and other executives) of the right business decisions.

In my prologue post, I noted how one of last year’s predictions by our leading spend management prophet Jason Busch might be on it’s way to reality. Last year, he predicted that securitizing direct materials and capacity was in sourcing’s future and that suppliers would benefit from the model as well as buyers. Then a study comes out by Haim Mendelson and Tunay Tunca of Stanford’s Graduate School of Business that finds that strategically using both fixed-price contracts and open market trading, supply chain participants can create greater efficiencies. Furthermore, both consumers and supply chains as a whole will benefit from these efficiencies.

In my main post, I noted that Spend Analysis Based Cost Modeling Decision Optimization are going to be the seven words of saving grace for tomorrow’s sourcing organization that wants to survive beyond the next decade. The only way companies are going to be able to maintain costs, yet alone achieve savings, is by getting a firm handle on costs and, more importantly, by identifying and achieving savings opportunities not previously explored. This is going to require an improved understanding of the cost drivers of what you are buying (cost modeling), and understanding of where variability exists, either within past buys or against market indices (spend analysis), and what the best award scenarios are (optimization). But it won’t be three applications at three different stages of the sourcing process, it will be one, and it will be at the beginning, center, and end of the sourcing process.

In essence, this years posts revolved around the common themes of talent and technology – and focussed specifically on the continued need for an appropriately assembled team, advanced analytics and optimization, and better process-based decision support software for tomorrow’s professionals. In the future, sourcing technology will be more powerful, easier to use, capable of guiding even the most novice of users through the process, and enable the optimal decision using advanced analytics and optimization. Tomorrow’s technology will merge the functions of general business analyst and sourcing agent into the single role of strategic sourcing professional who will lead the profession to new heights.