Key Takeaways

• Information is essential for effective procurement, as it enables deeper insights and better strategies.
• A strong sourcing strategy relies on three pillars: information, process, and leverage.
• Defined processes in sourcing turn strategy into actionable projects that achieve desired outcomes.
• Leveraging shared information across the organization enhances impact and accelerates strategy execution.
• Technology amplifies procurement success by enabling real-time data access and advanced risk management capabilities.

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Introduction

In the previous posts in this series, we discussed the importance of leading indicators, benchmarking, and continuous improvement for procurement organizations seeking to improve their results.  

In this final post, we will look at:  

• What these three strategies have in common
• The three keys to developing a strong category and sourcing strategy
• The role of technology in procurement

What do leading indicators, benchmarking, and continuous improvement have in common? Information!

The great college basketball coach, John Wooden said, “Failing to prepare is preparing to fail.”  

Similarly, Sun Tzu in the Art of War states, “If you know the enemy and know yourself, you need not fear the result of 100 battles.”  

Both of these quotes point to the fact that the key to effective preparation and strategy development centers on information or “knowing” as much as you can.  

The more informed your organization is, the greater the depth of insight and the better prepared you will be to address any type of situation, identify and mitigate risks, create better strategies, and achieve better results. Additionally, such results will not be measured merely in terms of compliance but also in terms of value creation: profit, revenue, market share, customer satisfaction, stakeholder impact, and time to market, to name a few.

Indicators, benchmarking, and continuous improvement represent key elements in preparation and knowing thyself. They provide foundational information at the center of strategic planning.

Three keys to developing a sound category and sourcing strategy: Information, Process, and Leverage

Many companies develop category strategies to drive the best outcomes in terms of risk, quality, OTD, lead-time, service, customer satisfaction, and of course, total cost of ownership.  

In order to develop these robust category strategies, supply chain management (SCM) and procurement organizations work closely together gathering data, analyzing spend, forecasting demand, and profiling both needs and markets. They utilize tools such as a SWOT (strength, weaknesses, opportunities, and threats) analysis and Porters 5 Forces to understand the organization’s power in the Buyer–Supplier relationship. This coupled with spend and category segmentation provides powerful information.  

And remember, information is power. Some organizations believe that data is the priority. Data is an input variable, a collection of facts and figures. Individually, few decisions can be made from data alone. The key is transforming the data into Information.

Organizations with more robust information, gathered from more sources, that balance both a review of past performance coupled with future looking indicators, develop more effective strategies and realize better results.

On its own, however, information is not enough; it must be coupled with process, our second key. Leading organizations utilize well-defined category management processes that include supplier relationship components, marketplace analysis, risk analysis, and spend analysis coupled with standardized 6 Step Sourcing processes that translate the category strategy into specific sourcing projects.  

The final strategic key includes, wherever and whenever possible, the power of leverage. Leverage may be derived from a combination of factors such as consolidation of spend geographically or within a category, optimizing suppliers, exploiting supplier capabilities, or . . . leveraging information across the organization.

The power of information and process enjoys an exponential impact and higher return when it is leveraged across the organization. Information that is concentrated in the hands of a few may generate value, but when information is shared across the organization through broad access, this may be leveraged to drive change, better implementation of strategy, better risk management, and better realization of value in a shorter period of time for a longer period of return.  

Conclusion: The role of technology

In today’s complex information environments, skilled teams with processes enjoy the benefits of enabling technology as a value impact multiplier in ways that only 20 years ago were just being dreamed up. The ability to rapidly share information, scale, develop strategy, execute, measure results, adjust, and improve, is at the forefront of our technology evolution.  

Leading organizations are now able to utilize enabling technology to integrate the information elements from sources such as their ERP, contract life cycle management, supplier information, and spend management with their source to contract/pay to drive significant results. And that’s even before we consider the power we now have to implement AIML, RPA, and integrations across functions and systems.

Many solutions exist today that enable key elements of this information, process, and leverage triad. Solutions that offer or address data enrichment, supplier risk, ESG, cybersecurity, health and safety, and compliance such as Avetta’s, are powerful tools for enabling these three strategic keys throughout your organization. While individually these keys are important, only by coupling them together through the right technology will your organization be able to maximize results.

Avetta is a SaaS software company providing supply chain risk management solutions. Avetta’s platform is trusted by over 130,000 suppliers in over 120 countries. Visit Avetta.com to learn more about our supplier prequalification solutions.