Enterprises that employ advanced sourcing strategies are positively impacting product development cycles and building stronger supplier relationships by making better, more informed decisions. They are also driving innovation and to be certain, they are saving more money than their competitors.
On average, the enterprises participating in this benchmark report:
- Identify savings of 11.9% per sourcing event
- Realize savings of 9.4% per sourcing event (savings that are actually implemented and “realized”)
- Utilize a formal strategic sourcing process on 43% of their total spend
- Utilize e-sourcing across 20% of their total spend
- Employ advanced sourcing strategies on 15 to 40% of their sourcing initiatives
Considering the benefits seen by the average e-sourcing program, it is surprising that a full 36% of this benchmark’s respondents (and 20% of all large enterprises) fail to utilize any level of e-sourcing.
Implications & Analysis
Best in Class enterprises use formal strategic sourcing and e-sourcing processes to drive greater e-sourcing throughput, achieve higher than average savings, and provide greater value to the enterprise. They are 32% more likely to employ advanced sourcing strategies and proclaim a 54% edge in their proficiency. Their superior performance is perhaps best exemplified by having realized savings results that are 39% better than their competitors.
Recommendations for Action
The gradual erosion of savings rates from e-sourcing events that we have seen over the past few years will continue. The following strategies will help enterprises maximize their returns:
- Develop, augment, or outsource process, category, supply market, and technology expertise. Establish centers of excellence for sustainable proficiency.
- Employ advanced sourcing strategies across a wider set of categories. Look at complex categories, including services, logistics, T&E, and direct/strategic materials. - Focus on realized savings and correlate them to enterprise-level financial metrics (e.g., EPS).
Aberdeen Group has tracked the usage of and results from e-sourcing since its inception. This benchmark builds upon those earlier research efforts by examining the opportunities, challenges, and results of the sourcing programs of over 160 enterprises. Several case studies are included in this report to provide examples of the different sourcing strategies that enterprises are employing today to extend the value of their e-sourcing programs. The findings and recommendations of this report are intended to aid sourcing professionals drive sustainable improvement through their strategic sourcing and esourcing processes by utilizing advanced sourcing strategies and technology.
T he primary role of the procurement function in strategic business initiatives has begun to shift in recent times from a singular focus on cost savings/avoidance to the broader management of supply availability and risk, while still maintaining competitive cost structures. And though its reported or “realized” savings notably lags “identified” savings, e-sourcing, in the broadest sense, has generally over-delivered on its promise of savings for the enterprise. In fact, the general adoption of e-sourcing has served as the major catalyst in the transformation of many corporate procurement organizations from traditional back office function to strategic business partner. Yet, as the early adopters return time and again to the same e-sourcing well, the return on their e-sourcing initiatives has begun to erode. This, in turn, will slow the future investment in many procurement- related areas and curtail this group’s growing visibility across the enterprise.
Technology-enabled Sourcing
Technology-enabled sourcing, or e-sourcing, is the use of web-based applications and decision support tools to automate the strategic sourcing (and/or spot sourcing) process. E-sourcing is most commonly associated with the supplier negotiation process where a buyer creates an online request for information/price/quote (“e-RFx”) or reverse auction that contains: a) business and category requirements, b) defined business rules that drive bidding activity and control participant visibility, c) an opportunity for suppliers to provide the requested data, and d) an evaluation framework. The relatively high e-sourcing adoption rates reflect the application’s ability to model the traditional offline strategic sourcing process. Common event or negotiation types include RFI, RFP, RFQ, tender, reverse auctions, and one-to-one or one-to-many negotiations. Key to achieving sustainable results in e-sourcing is the ability to leverage category, process, supply base, and technology expertise into every online negotiation. Many systems now offer robust knowledge management capabilities, including RFx template creation, document repositories, and standardized workflows that enable rapid event creation.
