Strategic Sourcing is the fastest way to value creation for most companies yielding 5% to over 25% in materials and services costs.  When you add eProcurement and Supplier Relationship Management to Strategic Sourcing, additional value is achieved and sustained.

To know if this is right for your company to ask the following three questions:

1. How well do we manage procurement of direct and indirect good and services?
2. How well do we manage contracts with the existing supply base?
3. How fragmented (# of vendors in each category) is our spend?

If you an unsure about your company’s capabilities or spend is fragmented there is value creation opportunity. How much value creation is there? For most companies, the value opportunity is north of 5%, and may be above 25%.

The Three Key Value Creators You Must Implement

There are five segments of value to unlock. These five are: Supply Base, Demand Management, and Total Cost Management, eProcurement, and Supplier Relationship Management.

Supply Base

Supply Base (SB) value comes from working with the supply base, by defragmentation and negotiation with existing and new suppliers. The benefit of working this part of strategic sourcing is commonly between 5% and 15% depending on factors that include supply base fragmentation and recent supply base rationalization.

Demand Management

Demand Management (DM), the second step in Strategic Sourcing, is a multi-step operational supply chain management process used to create reliable forecasts and achieves a value of 4% to 10%. Effective demand planning can improve the accuracy of revenue forecasts, align inventory levels with peaks and troughs in demand, and enhance profitability for a given channel or product.

Total Cost Management

Total Cost Management (TCM) is the process of reducing overall costs while improving the strategic position of a business and creates an additional value of 3% to 5%.

When worked together, these three, SB, DM, and TCM, are the fastest way to create value.

Maximizing Your Results with Full Transformation

eProcurement

Strategies leak. The value created by Strategic Sourcing erodes over time without a tool in place to sustain value. eProcurement is the business-to-business purchase of supplies and services through the internet. Elements of eProcurement include workflow management, e-Informing, e-Tendering, e-Auctioning, vendor management, catalog management, Purchase Order Integration, Order Status, Ship Notice, e-invoicing, e-payment, and contract management. eProcurement both supports the value creation from Strategic Sourcing and adds 2% to 5% in value.

Supplier Relationship Management

Full Transformation adds Supplier Relationship Management (SRM), with a value of 2% to 5%. SRM is the systematic approach of assessing suppliers’ contributions and influence on success, determining tactics to maximize suppliers’ performance and develops the strategic plan for executing on these determinations. It helps to create positive buyer-supplier relationships and determines which activities to engage in with each supplier.

The following chart provides a quick view of the general issues solved, the hard dollar value and the functionality enabled.

Taking action now can lead to increased returns in 6-12 months!

To learn more about how you can leverage strategic sourcing strategies and create massive returns in your organization, request a complimentary consultation here.