Strategic sourcing is an extremely valuable lever for procurement and the business as a whole - when completed correctly.
Systems that aim to drive strategic sourcing have existed for many years, however, existing systems continue to post low adoption figures within many businesses, despite considerable investment. Would it be a surprise to learn that all of the systems on the market are still being outperformed by the same competitor?
Microsoft Office is still the dominant toolset of choice for all and any strategic sourcing processes. Its competing tools used to primarily include Excel, PowerPoint and Outlook. However, as Office 365 rolls out with Teams and SharePoint, the competition has never been stronger.
Within this ecosystem, procurement can easily set up Teams with the relevant business stakeholders, conferencing is one-click away, plans and decision logs can be transparent and collaboration on key documents and deliverables is simple.
To be truly competitive, strategic sourcing systems need to address three main areas on why they tend to fail.
1. The “RFx pay-off” is too late
Standard strategic sourcing systems generally focus on RFx collection and management as the big pay-off, and often there is little functionality in the system to provide benefit before that step. This is a problem because it is weeks or months into the process, and norms within the working group have already formed. If teams are using Office 365 collaboratively, the competition might be already over.
Strategic sourcing platforms need to provide a payoff early in the process in order for it to become part of the toolset for the initiative.
A strategic sourcing platform should also have the functionality to provide procurement users with content and information (benchmarking, templates, examples, market insight) that help to build the initial business case and drive the early steps of the process.
2. The relationship is all give and no get
Generally, existing systems are quite cumbersome, requiring a lot of effort to update with the need to input copious information manually. When was the last time the system gave anything back to you?
Take the example of sending an RFx to a group of suppliers, you often must:
- Set-up the RFx (this is adding a base set of information to the system)
- Upload a bunch of files that you have already created in an Office document (either a pricing sheet or questionnaire)
- Upload a list of suppliers and contact details; again, likely from an Office document (you’ve probably already contacted them separately via email)
- Add a set of internal collaborators
- Write a series of communication messages before publishing, as you would in Outlook
Clearly it is useful for the business if the system is used from an audit perspective; but for the person completing the activities, this is extra work without an immediate pay-off. Many will simply choose to stay with Microsoft Office.
The tracking, Q&A, reminder and reporting functionalities may help during the RFx but, if the initial barrier is too high, the user will never see these benefits and their behaviours will never change.
Instead, strategic sourcing systems need to make each information exchange a positive, transactional process. For example, as soon as the user adds the category, the system should seek to provide help and guidance on how to perform the RFx. This can be presented in many forms – for example this could be example questions for the category, battle-tested commercial models or potential suppliers with their merits and weaknesses.
The key is to create a process where there is value for the user in providing each piece of information to the system. That positive feedback loop will allow the system to become the first point of call for any process step, instead of Excel, and not just an administrative burden.
3. Feature rich but guidance poor
Strategic sourcing systems are constantly adding more functionalities. Is each piece of functionality useful, or is this just in a drive to be the most feature-rich system?
Zooming out, Excel and PowerPoint aren’t intuitive tools, but people are trained every day on how to use them. Flexible tools like these require a high level of consistent training, otherwise they can be overwhelming.
Strategic sourcing systems will not reach that level of consistent use. As a result, too many extra features and too much flexibility can even be considered part of the problem.
System providers need to be thinking about how to guide the user through the sourcing process with a much simpler interface. This is not about having better workflow engines or more ’steps’ in the process. Instead, it is about taking information from the user and converting that into guided actions on what the next steps should be, with the content to match.
Reposition the system, banish the administrative burden
There is potential for strategic sourcing platforms, but they need to provide benefit throughout the entire process, not just at the RFx stage.
This benefit needs to be for the end-user rather than the company. Improved automation and reporting play a part, but technology should be seen as the vehicle for knowledge and guidance rather than the main event. To succeed, a new platform needs to provide simple, actionable guidance to the user as part of a positive transaction. Only then will it become the first point of call for a process step, rather than an administrative burden of today’s systems.