If you have implemented e-sourcing, you know that it can dramatically improve your team's productivity. Success means delivering meaningful savings and becoming a trusted advisor to your business partners. Once you've done that, you will get people from all over the company knocking on your door for help. You may also be wondering whether you and your team are sourcing everything you could. After you've hit the big categories, there may still be a long tail of other categories that aren't being addressed. But with limited time and resources, your team can only be directly involved in so many events.
The pull situation that results from a track record of delivering results for the business and being seen as a valuable resource is a great problem to have. You have an opportunity to capitalize on that engagement and extend the reach of your sourcing organization. How? By setting up a process and letting business users conduct their own simple sourcing events without your direct involvement. In short, by giving them some simple tools and instructions on how to use them.
Sourcing experts must still manage the most strategic and highest spend categories. But if you're willing to teach, train, and let go and trust, you can build an organization-wide, self-service sourcing juggernaut that racks up savings under your supervision. By following these five best practices, you can turn the uninitiated into self-service sourcing superstars.
1. Automate governance and compliance. Many sourcing organizations fear letting business people source because of all the policies and conditions that must be followed to ensure fair and compliant sourcing. With e-sourcing software that enables self-service sourcing, you can control compliance by providing templates set up by your team. As long as people use your templates when they run events, they'll adhere to company policies without even thinking about it. When you set up e-sourcing with your commodity structure and some simple templates, users from all over the organization can start running self-service events. This approach lets even isolated, far-flung users run successful sourcing events without formal training.
2. Source well-defined items. Items with clear, detailed specifications that can get apples-to-apples bids are good for beginners to try their hand at sourcing. These will usually be previously purchased items where there's a clear bill of goods, or highly commoditized items where they'll likely be buying on price. It doesn't really matter whether it's direct materials or indirect, or even services. Anything can be sourced if it's defined well enough. But if you're working on a new concept, or don't know exactly what you want, leave that to someone on the sourcing team who can work closely with manufacturers to develop prototypes and start defining specifications. Once that part is done, you might be able to turn it over to end-users to source. I offer the following example:
3. Turn neophytes loose in a favorable market. If you were looking to buy polyester in the days when the price of oil was going way up, it was more difficult to get competitive bids. There are ways to work with suppliers in a market like that, but it takes category, sourcing, and negotiation expertise. Let beginners source in a buyers' market, but leave sourcing in unfavorable markets to the pros.
4. Make sure there are enough suppliers. In specialized categories, there is often only one viable supplier. That's not a category that beginners can negotiate easily. Ideally, there should be a minimum of three viable suppliers for sourcing newbies to run a successful event. To make the e-sourcing event more competitive, it may make sense to open up the field so that more suppliers can bid. You could consider inviting suppliers from different regions or even different countries. Or you could consider inviting general purpose suppliers that can still meet your specific needs. For example, instead of just inviting office chair suppliers, you could invite office furniture suppliers or even office supplies suppliers to bid on an office chair event.
5. Use recurring events to capture price fluctuations. In categories with recurring spend, pricing might be left up to the market to take advantage of occasional slack in supplier capacity. Consider the case of a retailer that orders in-store signage each month. Rather than awarding a long-term contract, the retailer can run a reverse auction to send out each month's signage for bid to all the local print shops. If a print shop were very busy, it would not bid very aggressively. However, if another print shop had some extra capacity, it would bid more aggressively in order to win the business and fill production lines that would otherwise remain empty. Business users don't need the help of a Sourcing pro to execute this strategy: All that's needed is running an identical event every month.
eSourcing software can increase the capacity of the sourcing team, but even with the best tools and team there's probably still more you can do. Almost every company has areas of unaddressed spend or areas that are being sourced but not yielding all possible savings. To home in on the long tail of spend, empower business users to do some of their own sourcing. Set some minimum and maximum dollar amounts for what they're allowed to source. Automate compliance, and select the right categories for them to start with. Hold their hands for the first few events. Then let them loose and use your software to watch their skills, spend under management, and savings grow.