Strategic Sourcing Software for Competitive Advantage

Quynh Pham

Quynh Pham | 09/07/2024

Strategic Sourcing Software for Competitive Advantage

Every business decision comes with a trade-off. Whether the decision is recruitment, financial, policy, or technology-related, every call made should be thought through carefully.

The same can be said for sourcing processes. More than conventional purchasing, strategic sourcing is focused on the total cost of ownership rather than the total cost of ownership, as this bigger picture involves a myriad of aspects, such as supplier management and contract management. Today’s article will explore and discuss strategic sourcing software, why you need it, and how to find the one that will work best for your company’s logistics processes.

Key Takeaways:

  • Strategic sourcing software is a comprehensive solution to cost savings and maximizing vendor value.
  • It is a platform that centralizes all the essential information regarding vendors, cost savings, and compliance.
  • When selecting sourcing software, keep in mind your objectives and specifications to select a tool that will improve your procurement initiatives.

What Is Strategic Sourcing Software?

What Is Strategic Sourcing Software?

Strategic sourcing software is a tool designed to help organizations streamline and optimize their sourcing and procurement process. The software formalizes how information is gathered and utilized in these processes. It assists in identifying, evaluating, and selecting suppliers to secure the best value for goods and services.

The software includes functionalities such as market research, supplier identification, contract negotiation, performance management, and regulations compliance. These features aim to reduce costs, improve efficiency and supplier relationships, and ensure quality and compliance in procurement activities.

Strategic Sourcing Software Vs. Procurement and Vendor Selection

Strategic Sourcing Software Vs. Procurement and Vendor Selection

On the surface, vendor selection and procurement are similar to strategic sourcing. However, there are a few key differences between these operations.

  
Strategic SourcingFocuses on the bigger picture to calculate the total cost of ownership for long-term benefits.
Vendor SelectionFocuses on one specific aspect of the vendor, e.g. costs, quantity, quality, etc.
ProcurementFocuses on selecting and purchasing goods and services rather than taking other factors, like cost of operation, into consideration.

Why You Need Strategic Sourcing Software: An In-Depth Look

Why You Need Strategic Sourcing Software: An In-Depth Look

7-Step Strategic Sourcing Process

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By looking at the flow of strategic sourcing, it is easier to understand how it differs from conventional sourcing or vendor picking.

1. Spend Analysis. The first step to do is planning. This involves gathering the necessary information regarding what product is bought, in what quantity and what the budget is.

2. Market Research. This step involves taking a close look at the market dynamics and trends and creating a supplier portfolio to prepare for future negotiations.

3. Define sourcing approach. Work with teams involved in the souring process to determine your company’s goals and unique selling points and analyze them to see if there are any supplier alternatives to the current ones.

4. Create sourcing events. Conduct thorough research into existing and new suppliers to participate in the bidding process. You can also request proposals regarding specific information like products, legal terms, delivery, etc.

5. Evaluate Bids. After having set up a timeframe for bid evaluation, you and your team should go through and compare the bids side-by-side. Often there are several rounds of negotiation involved before the final decision.

6. Select and Integrate Suppliers. After the selection process, you work to integrate suppliers into the existing operations. During this process, both parties often establish communication channels for effective collaboration.

7. Monitor and optimize. Continuous monitoring of your supplier is needed to make sure all the demands are met. The strategic sourcing plan should be reviewed and adjusted regularly.

Benefits of Strategic Sourcing Solution

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Manually handling numerous tasks in the source-to-contract process proves to be error-prone. Beyond a tool to keep up with the extensive digital transformation surge, strategic sourcing solutions can elevate your business operation as a whole and impact the bottom line positively.

Reduced Costs and Risk

Effective strategic sourcing reduces costs and risks in the procurement process. The software stores and analyzes a multitude of information regarding the supplier, e.g. supplier performance in the past or terms they are willing to negotiate. Paired with spending management features and a strict compliance checklist, organizations increase the probability of acquiring high-quality goods and meeting performance benchmarks.

Improved Efficiency

Data can become an organization’s superpower. Robust strategic sourcing software can be your superpower by uncovering frauds, eliminating errors, and continuously providing you with helpful insights that enhance the efficiency of the source-to-pay process.

Increased Transparency and Collaboration

The software acts as a central information hub. Relevant stakeholders can access and compare suppliers quickly and conveniently, identify supplier risk, and push the discussions forward faster.

Better Supplier Relationships and Performance

Strategic sourcing software is considered part of supplier value management platforms (SVM). This means one of the strategic sourcing goals is to maximize the supplier’s value by continuously managing and improving supplier relationships and performance throughout the entire supplier lifecycle.

Essential Features of a Strategic Sourcing Solution

Flexible RFx Functionality

Strategic sourcing software should be able to generate RFx. RFx stands for “Request for Anything,” and “X” stands for anything. RFP (Request for Proposal), RFQ (Request for Quote), and RFI (Request for Information) are all included under RFx.This process automation saves your team a lot of time and energy.

Supplier Management

Procurement projects involve numerous suppliers. Supplier management functions lead to easy onboarding processes, performance and transaction tracking, and more effective supplier collaboration.

Purchase Order and Inventory Management

In addition to providing visibility into the purchase lifecycle, purchase order (PO) management is a way to track inventory levels. It makes sure that businesses don’t overorder or order too late and that the customer’s needs are always met.

Contract Management

Contract management is more than storing and tracking performance metrics. The feature handles end-to-end agreements to ensure compliance and maximize value from the contract lifecycle.

Spend Analysis

A key benefit of sourcing software is cost reduction. By providing businesses with a comprehensive picture of spending patterns and supplier prices, businesses have a clearer idea of consolidating suppliers, asking for bulk discounts, or even re-negotiated terms. In a way, this feature also functions as a savings tracking dashboard.

Mobile Access

Allowing mobile success further boosts productivity since it is convenient - staff can access the dashboard anytime.

Data Analysis

Data analysis is another must when it comes to sourcing software. Raw material fluctuations, trends forecast, customer feedback and demand analysis along with spending analysis will provide users with a comprehensive picture of sourcing practices.

How Do You Choose the Right Strategic Sourcing Software?

There are general rules to follow in order to evaluate and choose the most suitable strategic sourcing software for your organization.

Define Requirements

The first step is to answer some questions regarding your desired software.

  • What are your expectations when it comes to sourcing software?
  • What goals do you want to achieve with this technology?
  • What are must-have functionalities, e.g., conducting market research, managing suppliers and types of goods, or the ability to categorize per-volume purchases? You can always opt for free versions or demos to test the water and see if the software meets your needs.

Integration

It wouldn’t be as productive if you had to open ten tabs at once to access information scattered in an ERP, CRM, and sourcing software. Hence, examine how the software will integrate into your existing systems. If commercially available software has trouble integrating, consider reaching out to outsourcing companies to build one that fits your needs. You can find our guide to finding the right outsourcing team to meet all your sourcing needs.

Scalability

Your selected solution should be able to grow alongside your business. Regardless of the number of users, the software should provide your team with a consistent user experience and robust performance.

A Quick Look at The Top Sourcing Software

Here’s a quick summary of SAP, a major player in the software sourcing field. You can use this as a starting point to find the most suitable sourcing software for your team.

SAP Ariba Sourcing Suite

SAP Ariba is a smart solution for managing raw materials and navigating the changing market.

Features:

  • Payables automation
  • Contract lifecycle management
  • Vendor management
  • Supplier risk management
  • Supplier Management
  • Sourcing
  • Procurement

Pros:

  • Minimizes risk and accelerates contract lifecycle with built-in contract management
  • Saves time and effort by automating accounts payable

Cons:

  • The steep learning curve for some users

Wrapping Up {heading2-7}

To stay on top of the game, you need to be strategic and optimize every single operation within the business. You will be able to maximize your competitive edge even further with the right tools, and in this case, it is suitable strategic sourcing software.

If you are interested in securing tailored software that fits your needs, don’t hesitate to reach out to Orient Software! We are committed to delivering the most high-quality and comprehensive services to boost your procurement project efficiency.

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