Loading ...
Comments to my recent posts on “Why e-Sourcing is Good for Suppliers” continue to roll in. One particular remark raises a touchstone issue. Kevin Brooks, a former big-wig at a procurement solution provider cum bigger-wig at a performance management startup asks:
“Maybe it’s time to drop the “e” and simply accept that this is part of the normal sourcing process? The problem with highlighting the “e” factor seems to be that it puts the spotlight on the technology rather than the strategy. Who cares what the tactics are? If you could figure out how to strategically source better using paper and hamsters, have at it!”
I completely agree with Kevin’s sentiment. (Except maybe the hampsters part.) But I fear that the “e” part of e-sourcing actually instills a level of discipline, process standardization, and knowledge management that have been elusive (if not completely lacking) with traditional offline processes. The “e” enables a level of information transparency that allows competition on true and objective market dynamics and value — not subjective “measures” discussed on the golf course.
So why the resistance? In a word, laziness.
Buyers don’t like the way e-sourcing adds discipline and accountability to process. Dave Nelson, supply management wunderkid of Honda, John Deere, and Delphi, once said “buyers do not like e-sourcing because it makes them do their work.” SpendMatters author Jason Busch is a bit more jaded in his assessment, saying ”e-sourcing doesn’t allow buyers to select suppliers based on the size of their Morton’s [steakhouse] expense account.” Specifically, e-sourcing tools guide buyers through a standard, company-approved process that requires detailed specifications, regimented tasks, and auditable decision-making frameworks. It also reinforces a level playing field so all suppliers equally understand the requirements and selection criteria, enabling fair competition.
Suppliers don’t like e-sourcing because it introduces a level of competition and transparency that the market previously lacked. Suppliers can no longer cover up inefficiencies or non-competitive offerings or pricing. Instead, they are forced to compete on their actual capabilities and operational effectiveness.
In short, e-sourcing tools enable a new level of process standardization, visibility, and control to instill integrity into the sourcing process and ensure repeatable strategic sourcing success. These attributes are difficult, if not impossible, to replicate in the offline world.
And while I agree that a tool is only as good as the process, knowledge, and skills of the organization using it. There is mounting evidence that e-sourcing is an accelerant to ensuring that these attributes are reinforced across the organization and repeated and continually refined for years to come.
So, it is true that the “e” part of sourcing should be irrelevant as, in the words of leading research houses like Gartner and Aberdeen Group, larege (and now mid-size) enterprises have embraced e-sourcing as part of their supply management toolkit. But we still have a long way to go to educate individual buyers and suppliers on why it is beneficial to all parties to move manual sourcing strategy and processes online.
6 responses so far ↓
1 Kevin Brooks // Aug 18, 2006 at 11:19 am
Tim, thanks for the plug (although “bigwig” might be a bit of a stretch!). I do think that many in our industry tend to get enamored with technology (to wit: the gushing over SOA and on-demand) and gloss over the core business value of any new innovation. On the flipside, consulting firms get enamored of “business process” models and idealized org structures and flows. Just as bad, in my opinion. The solution? Pay attention — real attention — to what matters to customers. If “e” helps move them forward, great. However, my guess is that it carries more baggage than it’s worth in most cases.
2 Supply Excellence » Sourcing Innovation: Prediction for Future of Strategic Sourcing // Aug 22, 2006 at 11:29 am
[...] In my more than 15 years as researching and advising on the supply management discipline, I have seen strategic sourcing advance more in the past five years than in the previous two decades. This rapid progress has been fueled largely by the introduction of new, Web-based sourcing management software (dare I say “e-sourcing”?) and decision-support technologies. Globalization, outsourcing, and tightening economic and supply market dynamics have also prompted enterprises to adjust and improve their strategic sourcing methods. Even since the introduction of e-sourcing tools in the mid-90s, we’ve seen sourcing and negotiation methods shift from a focus on price-based market transparency to a focus on achieving the best value solution that meets overall business objectives. [...]
3 Tim Cummins // Aug 22, 2006 at 12:38 pm
Tim’s comments mirror IACCM findings regarding the extent of e-contracting strategy and implementation - and the reluctance of our community to support adoption, even though it offers a source of major value-add (and an escape from the repetitive admin tasks that they all claim to hate). Laziness may be one reason; but fear is another; and both could be overcome if only functional leaders started to show vision and communication skills …. the real problem we see is that e-initiaitves tend to be disjointed tactical plays, rather than part of an over-arching organizational effectiveness strategy. That makes them threatening and also makes them feel like an optional inconvenience, rather than a path to the future.
Executives must become more coherent at mapping where their function is going and what its sources of value will be. Sadly, one cannot help but agree with many of today’s professionals - functional leaders all too often appear to be part of the problem, not the solution.
4 Tim Minahan // Aug 22, 2006 at 2:03 pm
Tim, I absolutely agree. Fear is an equal motivator for the resistance to e-sourcing as laziness.
I’ll never forget one of my earliest speeches on requisition-to-order (e-procurement) automation back in the mid-1990s. I was presenting at what was then called the National Association of Purchasing Managers (NAPM) annual conference. During the Q&A session a buyer stood up and said, “Why should I adopt e-procurement when it seems like it would put me out of a job?”
My answer: “Sir, if you feel your job is processing purchase requests, then you will indeed be out of a job.”
My point is that automation — whether it be e-sourcing, e-procurement, or contract lifecycle management — streamlines and improves process efficiency and effectiveneses, yielding better results and freeing up supply or contract managers to focus on more strategic tasks, such as sourcing new categories or collaborating with suppliers on waste reduction efforts.
Leading users have gone beyond automating existing processes and are now using improved spend and contract visibility in conjunction with advanced analytics to create new processes and decision scenarios that were previously impossible in the offline world. The result? The negotiation and management of best-value relationships that simultaneously reduce costs, mitigate risks, and enhance supply relationships.
The results are indisputable. Organizations like the IACCM have the duty to (re)educate of supply and contract managers on the potential of their discipline and provide best practices for how to improve.
5 Tim Cummins // Aug 22, 2006 at 2:32 pm
Well, as you know, we are trying hard! I think we are the only professional association that offers comprehensive, web-based learning materials that really focus on these added-value issues and techniques. We are certainly the only one that takes a value-chain approach - incorporating sales and procurement activity.
The organizations that have adopted IACCM Managed Learning and are completing IACCM’s benchmarked skills assessments have recognized that driving more efficient control and compliance through automation is a necessity to stay in busines. But they have understood that control and compliance isn’t a good way to build a career or to grow the business. The key is to use those tools as an underpin for added value and innovation; very much as you outline in your comments.
IACCM is fully commited to providing individuals and teams with the skill and knowledge they need to lead and flourish in this new environment. And as you know, we are also very strong advocates of an integrated, cross-business electronic contracting strategy. To win in the market, companies really need to build a consistent process and information flow that covers all trading relationships - buy and sell. It is driving some interesting changes in organization and accountability.
6 Tim Minahan // Aug 22, 2006 at 2:37 pm
Absolutely. And you should be commended for the great strides you have made. In my opinion, IACCM is the premier industry association for research, networking, and advice on negotiation and contract management issues.
I reiterate my endorsement and encouragement for all Supply Excellence readers to join the IACCM. More information can be found at http://www.iaccm.com
Leave a Comment