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e-Sourcing as a Key Component of your Spend Management Initiative – Part 2

Part 2 – Best Practices

Top performing organizations in the Spend Management discipline focus on creating a collaborative, repeatable and transferable process using systems/software in all areas of supply chain management.

For the Sourcing function specifically, reliance on:

  • spreadsheets for event data management and progress tracking,
  • emails for RFQ communications, both internal and external,
  • disconnected supporting document management

is not only difficult to support with a standard and repeatable process but also creates islands of information and increases the reliance on individuals with specific expertise or market knowledge.

Lacking a central repository of RFQ information for reporting and analysis, management struggles to determine progress of RFQ events or to identify process bottlenecks for improvement initiatives.

Proactively executing a spend management strategy across commodities can best be accomplished by considering the drivers of forecasted spend while contracts are still in the sourcing stage, rather than after contract completion and the contract is underway.

With the goal of managing spend at a very detailed level, top performing procurement organizations work to categorize all purchasing activity in a standard and structured manner. In the absence of a formal e-sourcing system, aligning sourcing activity with the goals and objectives of those key categories becomes more onerous and manual if not impossible.

Best in class organizations also work continuously to increase the frequency of existing contract validation activity to ensure market competitiveness and spend management alignment. This includes a formal cycle of review for all materials and services under contract to ensure pricing accurately reflects current market conditions.

Completing this cyclical review process in an effective manner requires an e-sourcing system that allows users to quickly identify a group of contracts, generate the RFQ(s) and send to appropriate suppliers with minimal effort and contract knowledge.

Finally, these top performers leverage an integrated decision support/business intelligence reporting system that accesses information from all functional areas. The lack of connection to a formal database of sourcing information often leaves this critical component of the process out of that macro level analysis and results in an incomplete picture of the Source to Pay function.

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