Procurement processes are ever evolving to meet customer supply and demand. Companies must engage in smart sourcing strategies to find and manage suppliers to achieve the four sourcing benefits of functionality, quality, price and speed of delivery. Unfortunately, some business owners still struggle to compete on a national and global scale due to inadequate sourcing procedures.
While esourcing provides a technological solution to upgrade procurement services, about 30 percent of companies have yet to adopt this versatile software suite. Yet some of the biggest companies, such as Amazon and Overstock, are showing the potential return on investment when utilizing eSourcing technologies. Tangible ROI is possible when recognizing its benefits of cost-effectiveness, managing sourcing tasks, and finding the best prices for products.
Successful Sourcing Management Tailored to Operations
Your company has different requirements for sourcing than your competitors, requiring software that affords scalability and customization. A benefit of eSourcing is that it allows you to customize templates, so you have the data that is required to run your operations. It affords more transparency with information, allowing it to be automatically available for use in spreadsheets and bidding documents. It also adapts to the growing future needs of your business.
When Overstock.com began adding new product lines for customers, the company needed a versatile management system to handle the larger volume of products from suppliers. The logistical challenges to its supply chain required the company to seek out the best software solutions that were innovative and scalable, so they could keep track of their spend analysis to lower operational costs and increase revenue. By successfully implementing such software, the company was able to raise its revenue from $40 million before software implementation up to $1.1 billion after using the management software. The company also lowered its cost per package from $5 to $2, lowered the number of daily hours the business had to be in operations to fulfill orders, and increased its order fulfillment capabilities. Overstock.com had a cost savings in the millions.
A recent ECSG case study shows that revisiting and managing contracts that are near expiration can also have a substantial impact on how much cost savings can be achieved. A retail company working with ECSG esourcing software was able to perform soft auctions to find new vendors, allowing it to get a savings of more than $227,000 below its baseline costs.
Maintaining Quality and Delivery Times
One of the biggest sourcing challenges involves maintaining quality products when changing suppliers while still ensuring that delivery times meet expectations. Finding suppliers that offer the lowest prices with the best service can become a daunting process of conducting multiple bids, garnering information and setting bid valuations that suit your operations. The available eSourcing technology offers tangible ROI when conducting multiple supplier bids to find the right suppliers that can handle offering products and services to your company in numerous locations across the country.
A pharmaceutical company working with EC Sourcing Group needed suppliers that could handle the janitorial services at its 250 locations in the United States. The company sought eSourcing software to lessen the number of suppliers while still maintaining quality and delivery times, as they were able to perform bid price valuation during the auction. The pharmaceutical company was able to whittle down the suppliers to two viable candidates that offered cost savings between 25 to 30 percent.
A prime example of versatile supplier management can be seen with Amazon. In 1998, the company strove to increase its product line without raising its operational or warehousing costs. The company conducted research, partnered with the right distributors, offered products from competitors, and increased warehouse capabilities. Amazon was able to lower its operating costs by 20 percent in 2003 by using the most optimal sourcing strategies.
The return on investment from eSourcing is available to your company. Implementing the right technology and software can allow the company to lower costs and raise revenue no matter what industry it is in.