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Buyer's Guide

by Daniel Harris,
Market Research Associate
Last Updated: March 16, 2017

With so many complexities in the supply chain, businesses are feeling an increasing need to create a sourcing process that is both transparent and efficient. Strategic sourcing solutions enable supply chain professionals to manage procurement issues and make informed decisions. We’ve created this buyer’s guide to identify the most common features and benefits associated with the strategic sourcing software and to help you more easily navigate the selection process.

Here's what we'll cover:

What Is Strategic Sourcing Software?
Common Features of Strategic Sourcing Software
Evaluating Strategic Sourcing Software
Benefits of Strategic Sourcing Software
Important Considerations

What Is Strategic Sourcing Software?

Strategic sourcing supports the information-gathering process that takes place before actual purchases are made. Whereas procurement software is more traditionally associated with the actual monetary transactions of purchasing, sourcing software is concerned with accumulating the data necessary to make smart and informed purchases.

Sourcing provides buyers with access into a vast system of supplier databases, which makes it easier to prescreen supplier data and analyze suppliers’ past successes and failures. Along with procurement and demand planning solutions, sourcing systems help organizations make intelligent decisions and are therefore a key element of supply chain management systems.

Common Features of Strategic Sourcing Software

Strategic sourcing software takes managers through the following steps of the strategic sourcing process:

Spend analysis The first stage of strategic sourcing is for the system to initiate a spend analysis to identify areas in which spend could be decreased through new sourcing projects.
Supplier filtering Based on revenue projections and market trends, the sourcing application begins to collect information and filter results, which saves time on information gathering and prevents buyers from wasting time and resources on suppliers that are obviously incompatible with their needs.
Electronic request for x (eRFX) Sourcing managers can submit requests for proposals, tenders, quotes and other forms of information in order to continue eliminating those suppliers that do not meet the organization’s needs or financial goals. Once the data starts coming in, the system manages that information and makes it easy to compare quotes and supplier capabilities.
Auction initiation Once a list of viable suppliers has been created, a reverse auction can force suppliers to compete with each other on price. The sourcing software handles incoming bids and communicates standing bids to competitors. Or it can hand this task over to purchasing software, which will carry out the PO process to its conclusion.
Contract management Allows businesses to document and track sourcing agreements. Some solutions comprise of basic functionalities, such as supplier details, contract value and contract end date. Advanced solutions offer contract negotiation, approval workflow and post-execution activities.
Supply base management (SBM) Enables sourcing professionals to collect and manage supplier information, risk and performance. This module collects supplier’s internal information from audit records and performance statistics. In addition, SBM integrates with external tools to collect data from web services, RSS feeds, and financials information.

Evaluating Strategic Sourcing Software

Strategic sourcing software focuses on different areas: Some focus on spend analysis, while others focus on request management. Many will offer additional features and functionality that are typically associated with procurement or supply chain planning solutions. So when selecting your vendor, assess the use case for your software and ensure that you look for something that meets those needs.

Specific questions to consider include:

  • What supplier information does the software have?
  • How (and how frequently) does the software update its supplier database?
  • Does the software focus in one area, such as spend analysis or contract development, or is it more of a comprehensive solution?
  • Will the software be used by itself, or in conjunction with procurement software or a comprehensive supply chain management system?

Benefits of Strategic Sourcing Software

Organizations realize the following benefits with the successful implementation of strategic sourcing software:

Process optimization. Strategic sourcing software enables executives to streamline and optimize their sourcing processes and strategies. With optimized processes, businesses can reduce sourcing cycles, improve process controls and generate savings. In addition, the software automates workflows and approval routing processes for quick turnaround of sourcing decisions. Streamlined processes increases efficiency in the workforce and enables them to make more timely decisions while following the organization’s compliance policies.

Efficient sourcing. With a common platform for collaboration between sourcing managers and suppliers, the sourcing process becomes more transparent which further enables managers to negotiate better and make more informed buying decisions. In addition, better collaboration with suppliers lays the groundwork for a long-term relationship and creates a fostering environment for all stakeholders.

Trend analysis and business intelligence. By using trend analysis and business intelligence (BI) tools, sourcing professionals can track their performance and take corrective action. Furthermore, advanced solutions update dashboards in real time. BI tools help drive revenue by identifying high-performing products and assisting sourcing executives in procuring these products. In addition, it enables users to identify microtrends in the market and analyze the business environment.

Important Considerations

Best-of-breed vs. integrated suite. Buyers often assume that the best solution comes with the maximum number of features; however, this is not necessarily the best approach for evaluating software. Business professionals should define their objectives and analyze whether a particular software solution will help them achieve those goals. Use cases suggest that the best way to identify goals is to involve all stakeholders in the buying process.

Cloud-based software. The trend toward cloud-based solutions is impacting many processes, and sourcing is one of them. This type of deployment offers several benefits, such as lower capital expenditure, reduced need for hardware infrastructure and access from remote locations. These solutions are commonly available on a subscription-based pricing model with monthly and annual billing periods. In addition, cloud-based software can be easily implemented in an organization’s current IT infrastructure without major compatibility issues.

Compatibility with mobile devices. For sourcing professionals that are always on-the-go, mobile access is a bonus. Mobile access allows these professionals to read, approve, share and collaborate with team members and suppliers from anywhere anytime, which provides additional flexibility to the sourcing process and accelerates the procurement process. In addition, these solutions enable businesses to stay updated with current technology trends, such as bring your own device (BYOD) and reduce strain on the infrastructure.

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