Part One of Three – Sourcing is the Missing Link!
Spend Management initiatives are becoming more and more prevalent as organizations increase their focus on overall Supply Chain Management efficiencies.
Spend initiatives focus on:
- sourcing strategy
- category expertise
- and purchasing execution
Key business drivers of improved Spend Management for organizations include:
- Continued and increasing pressure to reduce costs in the face of an overall rise in the energy, transportation and supply prices, as well as supply constraints
- Increased pressure for ensuring compliance of supply contracts
- Adherence to new internal regulatory environments such as SOX
- Internal pressures to increase the value of existing system investments, e.g. ERP
- Lean management efforts to improve inventory levels and reduce obsolescence costs
- Increased availability of analysis and visualization tools and systems, e.g. Business Intelligence, that facilitate the gathering, presentation and analysis of information.
Spend Management is focused on the execution aspects of procurement, gathering and considering data from systems such as:
- Accounts Payable
- Procurement card activity, etc.
However, this often does not consider data from or drive alignment with the Sourcing effort that ultimately sets the base-line for ongoing spend activity.
In many cases the lack of a formal e-Sourcing system results in buyers operating with a combination of spreadsheets and emails, providing no systematic directional control for the sourcing process, and no access to relevant data that should be a key component of spend management efforts.
In response to this gap in Spend Management initiatives, many companies are finding that implementation of an e-Sourcing solution can enhance and improve those initiatives through:
- Buyer productivity increases through elimination of manual processes
- Access to an accessible RFQ database for analysis and reuse
- Providing the ability to track suppliers’ sourcing performance as a valuable supply chain metric
- Building systematic alignment of sourcing with spend management direction
- Improving overall process and data standardization