Sourcing Innovation.com, a new blog from former sourcing optimization technology developer turned consultant Michael Lamoureux, has initiated a noble project: tap the top minds in the business for their view of the future of strategic sourcing and supporting sourcing technologies. I was honored to get the call.

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.

As sourcing methods (and e-sourcing technologies) continue to mature, we will see advances in the following areas: guided sourcing, hybrid sourcing, supply chain sourcing, frontline sourcing. Below I examine the first two of these sourcing approaches in more detail. I will delve into the latter two predictions in tomorrow’s post.

Guided sourcing

The most immediate advances in sourcing approaches and technologies will come in the area of advanced analytics and reporting. To some extent future is now.

Optimization-based sourcing technologies enable enterprises to simultaneously negotiate and evaluate complex bid structures against a wide range of interdependent sourcing objectives and constraints, such as set-asides for diversity goals or risk management strategies. Such evaluations were impossible using traditional and Excel-based analyses.

Likewise, role-based dashboards and portals are give supply management professionals — from commodity managers to Chief Procurement Officers – a command-and-control view into their most critical supply performance information (e.g., savings versus goal, contract compliance, performance issues, etc.) and tasks (e.g., supplier qualificiations, open sourcing projects, etc.).

Advances in the decision support area will come both in enhanced usability and applicability. Early optimization tools were complex to use  and focused on a narrow group of complex spend categories, particularly transportation and packaging. Such limitations made optimization impractical and too costly to use for most enterprises.Solution providers will improve usability, incorporating pull-down menus, wizards, and other utilities that allow sourcing managers to create and test multiple scenarios. Future optimization tools will also incorporate category-specific intelligence and cost models to improve usability further and to make optimization applicable to a wider range of spend categories.

Reporting dashboards will incorporate third-party intelligence and tools, such as supplier risk information, commodity pricing benchmarks, or category costing tips. Dashboards will also leverage open Web-portal standards to extend supply information to other enterprise stakeholders, such as the CFO or COO.

Hybrid sourcing

Since 2001, I have been predicting the emergence of the “hybrid sourcing model” that blends sourcing technologies with third-party supply market and sourcing intelligence.

In this scenario, the e-sourcing technology platform functions much like a cable box, providing the utility to access and organize information and resources required for effective sourcing. This platform connects to a network of subscription-based channels that provide programming in the form of supply market intelligence, commodity costing models, supplier information, and category-specific sourcing templates that are optimized for a specific e-sourcing tool (the cable box). The latter point is critical because, instead of using offline researching, these channels put supply content in context of your sourcing process and infrastructure.

In the perfect scenario, these third-party content channels would help enterprises capitalize on supply market shifts and minimize risks. For example, a certain channel might predict a tightening of supply or a future price increase for Commodity-X. Your company’s contract for this commodity may not come due until next year, but the channel sends an alert recommending renegotiating now. The alert is connected to full programming on Commodity-X, including supply market factors, cost models, and sourcing templates that can be loaded into your cable box. You shore up supply and locks in pricing in exchange for long-term volume commitments, avoiding the shortages and rising supply costs that are sure to face your competitors. (Hey, this strategy worked for Southwest Airlines.)

With the sourcing solution market winnowed down to less than a handful of truly viable providers and Global 2000 standardizing their e-sourcing infrastructure, this prediction is fast becoming a reality. Look for a cottage industry of sourcing consultants and commodity experts deliver sourcing intelligence directly into the major e-sourcing platforms.

Check back tomorrow for an examination of the emerging supply chain sourcing and frontline sourcing approaches.