In an ever-evolving procurement landscape, numerous challenges continue to hamper the journey towards sourcing excellence. Dealing with everyday hurdles such as understaffing and complex logistics, combined with more monumental issues like unpredictable demand spikes, procurement teams are consistently put to the test. Amid these challenges, the quest for sourcing excellence becomes an uphill battle, with antiquated tools and manual processes slowing down strategic sourcing. This article, based on the Keelvar e-book titled How to Achieve Sourcing Excellence Across Your Strategic, Tactical And Tail Spend, delves into these procurement challenges and the need for a more efficient and effective approach in the pursuit of sourcing excellence.
Procurement Challenges and the Quest for Sourcing Excellence
The procurement industry faces unprecedented obstacles, compounded by common daily challenges. These difficulties include understaffing, overstretching, unpredictable demand spikes, and complex logistics. With limited resources, achieving compliance and governance across all spend becomes a daunting task, hampering the pursuit of sourcing excellence.
Strategic sourcing processes are often slow and burdened by outdated tools and manual tasks. There's a prevalent difficulty in meeting increased expectations due to the limitations of existing tools, which typically manage only specific spend areas. The constant "firefighting mode" in sourcing makes planning difficult and hinders focus on strategic projects.
These challenges, while well-known in procurement, still have elusive solutions. To attain sourcing excellence, a solution is needed that pairs human workers and technology across all spend categories. This solution must facilitate different spending frequencies, freeing people for high-ROI tasks. However, misconceptions persist that strategic and tail spend should be treated separately, which proves ineffective under current workload pressures.
A Year in the Life of a Sourcing Team and the Need for Efficiency
A typical year for a sourcing team sees a diverse array of sourcing categories with events of varying complexity. The workload is unpredictable, and spikes in demands are common. These challenges necessitate different approaches for high and low spend events.
Given the relentless workload, planning ahead is nearly impossible, forcing teams into a constant "firefighting mode". To alleviate this, sourcing teams need systems that allow them to focus on higher spend events, promoting strategic activities and supplier relationship management. This approach also aims to automate smaller, lower spend projects to save time and resources.
Despite the logic and straightforwardness of this strategy, most individuals adhere to a traditional perspective on sourcing, rooted in the power law distribution of sourcing events. This mindset might be hindering the pursuit of more effective procurement practices.
Why We Must Rethink the Conventional View on Sourcing
The traditional approach of classifying sourcing events by spend volume is flawed, as it overlooks category-specific complexities. For instance, low spend events can be complex, and vice versa. Bid data volume, not just spend, affects the complexity of an event. Viewing spend categories either as strategic or non-strategic could lead to oversimplification and inefficient management.
Sourcing strategies should consider each category's specific needs, instead of merely looking at the spend volume. Technologies should be capable of automating different events suited to their unique requirements. Achieving sourcing excellence necessitates automation that complements strategic sourcing with tactical buying.
Old sourcing applications that lack flexibility and automation capacity are obsolete. Modern technology, like AI-powered solutions, can effectively manage complexity across sourcing events, providing win-win outcomes for buyers and suppliers. However, organizations must ensure their automation strategies don't overly concentrate on strategic spends, ignoring 'tail' spends.
The ideal sourcing technology should provide a seamless transition from manual to automated sourcing, depending on spend volumes. A holistic approach to sourcing, combining optimization with autonomous sourcing, is recommended, focusing human expertise on strategic spends while automating low touch, low spend processes.
It's crucial to understand the limitations of traditional perceptions and technology, and prioritize category-specific sourcing strategies.
In conclusion, overcoming the challenges in procurement and achieving sourcing excellence requires a significant shift in traditional perceptions and practices. The need to embrace technology and automation has never been more critical, allowing procurement teams to focus on strategic spending while efficiently handling lower spend events. Recognizing the complexity and unique requirements of each spending category is a key step in this direction. As we move forward, the combination of human expertise with technological advancements will pave the way for a more efficient and effective procurement process, ultimately leading to sourcing excellence.