We certainly live in interesting times. Having experienced nearly two decades in the world of sourcing and procurement, I can safely say that procurement is certainly experiencing fascinating times. What used to be a contentious relationship between the purchasing organization and their supply base has now turned into one marked with collaborative peace and harmony. Gone are the days when suppliers were viewed with distrust, and the name of the game was to get the best product or service for the lowest price. We have seen our industry grow from having a primary and sole focus on savings and cash optimization to supplier risk optimization and finally to enterprise value optimization. This latest phase has led to more in-depth collaboration with suppliers, making them partners in an organization’s success by making suppliers allies rather than enemies. Yet, here I stand to make a case for a return to basics.
Now, by no means am I proposing returning to the battlefield wastelands that were once characteristic of those early days of spot bids and auctions, far from it. Modern CPOs and supplier executives both realize that hyper-competition based solely on price parameters is a losing proposition in the long run. However, with innovations in the supply chain, influx of technology and advanced analytics being used by suppliers, better predictive modeling and efficient scaling of services, suppliers have improved their top and bottom lines. Competitive forces within the ranks of the suppliers have also led to innovation and improvements in the quality, speed and efficiency of products and services being delivered to customers. A classic example that comes to mind is the world of corporate training. We have graduated from week-long in-person training sessions led by an instructor going through hundreds of slides to ones delivered via private online meeting rooms complete with video conferencing, polling, Q&A options and capturing of attendee completion data. The point is, technology, innovation and market forces have made suppliers better at delivering. It is time procurement responded with its best interests in mind.
It is with these market forces in the mind that I urge our fellow procurement and sourcing practitioners to consider going back to basics: The world of competitive strategic sourcing. Far from re-educating our readers on the hows and whys of competitive sourcing, I’d like instead to focus on the key benefits procurement can draw on:
New Supplier Discovery
By introducing new suppliers into your bidding process, you not only stand to learn and discover a new product or service offerings but also keep your incumbents from getting complacent.
Reduced Supplier Risk
By considering two or more suppliers, procurement can reduce risk by avoiding over-reliance on one or two key suppliers. This is certainly key for an organization whose key revenue driver are dependent on their supply chain.
Improved Supply Chain Visibility
By adopting and promoting online bidding and sourcing processes, procurement can get back into the driver’s seat and enforce compliance while improving visibility across the organization. Where, when and how is the money being spent becomes an easier riddle to solve when soliciting, awarding and purchasing is being conducted through a process and an associated solution.
This one goes without saying, competitive bidding, when done right, will not only ensure the highest quality and “no-surprises” product & service but also deliver it to you at the best possible price. This not only helps with an organization’s bottom line but absolutely impacts profitability by lowering COGS and operational expenses.
In closing, while we currently live in a thriving market, we are all well too aware of the fact that markets and indexes are cyclical. Rather than wait for a downturn to invest in the case I have just laid out, one would be prudent to ‘make hay while the sun shines’. When the eventual downturn does occur, procurement, rather than being a reactionary member at the executive table can instead be a pro-active influencer who can help absorb the market induced revenue losses. As the saying goes, the best day to make an investment is yesterday. The second-best day is today.
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About the author:
Managing Partner, Americas
Saurabh Mehta is a business leader, mentor, friend and Managing Partner for Consus Global, Americas, leading sales and operations. Saurabh brings rich experience of over 20 years across Sourcing & Procurement from companies like Ivalua, AVON, Time Warner Inc and Accenture.