This post originally ran on February 14, 2011. However, it is still as relevant today as it was then and, for those of you who did read it before, not too much of a distraction to you as we approach the World Cup Final 😉
the doctor — along with many others — has been advocating for “next-generation sourcing” for some time. I couldn’t agree more that modern supply management organizations must take sourcing practices to the next level if they are going to continue to distill value from the discipline and practice.
But like most New Year’s Resolutions, while the aspiration to improve may be great, the effort may be too much for even the most committed. I see this a lot, especially when it comes the challenges of sourcing strategic, complex categories. Not without reason of course, but more and more I also see that the benefits of mastering the art of sourcing these challenging categories far outweigh the difficulties of the actual process.
Strategic categories mean different things to different businesses. For one company, the category may be transportation; for another, packaging material. The common denominator: the business can’t succeed without it, and can’t afford to over-pay for it.
To make decisions based on the most strategic objectives of the business, sourcing teams need to integrate many dimensions of information from areas well outside their domains. For example, if non-price factors like diversity or sustainability are part of the company’s corporate social responsibility initiative, those factors can — and should — be part of sourcing strategies.
As a result, the volume and the sheer variability of the information render common e-sourcing tools or Excel spreadsheets useless for collecting and evaluating proposals. That’s where high-definition sourcing — which combines technology, expertise and process — delivers the goods at the lowest total landed cost, and aligned with the greater organizational strategy.
So how do you know if high-definition sourcing can turn even the most complex categories into real value for your organization? There are generally three scenarios where the opportunity to apply this discipline will help you capture meaningful and sustainable savings
- The category leader is frustrated with traditional sourcing techniques
- The category is avoided by the faint of heart
- Sourcing alone will not deliver the value
Sound familiar? Odds are good that at least one of these reflects what’s happening in your organization. Regardless of which situation you face, there are immediate opportunities to be gained with high-definition sourcing
- Use technology to design and execute more sophisticated proposal collection and analysis, including the ability to use “what-if” scenarios.
- Build supplier performance monitoring and triggers for re-evaluating supplier selection into your category management solution
- Partner with suppliers to drive costs out of the system and strike the perfect balance between suppliers’ pricing and capabilities with buyer business constraints and preferences
- Tap domain and process experts to bring market and industry best practices to bear on your own sourcing process
The results will be well worth it. Best-in-class companies make the connection between complex categories and the business’ charter. Lowering initial costs is a given. More importantly, these leaders make better decisions based on capabilities and price and secure meaningful — and sustainable — savings.