Raising the Stakesfor e-Sourcing

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Some of the unique challenges faced by sourcing professionals are as

follows:UNIQUE CHALLENGES

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With globalization, sourcing teams have virtually no option to be

regionally or locally focused; they must be equipped to source, build

and sell anywhere in the world.

Bills of materials (BOMs) for certain products are extensive and highly

variable in terms of attributes, volumes, supplier characteristics,

locations, and so forth. What is more, these complex, high-volume

BOMs need to be sourced at high frequencies for globally distributed

business operations and divisions.

In general market benefits accrue to first movers, so sourcing teams

must be equipped to move hyper fast and on short notice in support of

product innovation, roll out, engineering changes and ramp to volume.

Companies that dream, design, build, market, sell and distribute their

own products are rare. Very often, the nexus of control over

profitability resides with suppliers, demanding different kinds of supply

relationships, intense focus on product/service quality and other

supplier performance metrics and more rigorous approaches to

managing supply risk.

Products live relatively short lives and often follow unique pricing

curves, starting high then dropping quickly and steeply. Each phase in

the product life cycle demands different sourcing strategies.

Supply chains have become exceedingly unpredictable due to reliance

on commodity inputs such as rare metals, patent and licensing

intricacies, globalization, and lean manufacturing and inventory

practices that add calculated risks.

Speed

Global ubiquity

High volume & complexity

Disintegration

Transitory

Volatility

A leading Zycus iSource customer from the industrial automation and control industry

recently and successfully executed an eRFQ spanning some 7,500+ line items and 98

suppliers worldwide. The global competitive cost discovery and sourcing efficiency

represented in such a large-scale event was unimaginable just a few years ago before

e-Sourcing solutions had evolved to their current state of the art. It is a sign of the

times in which sourcing teams push the envelope on global e-Sourcing adoption,

utilization and innovation.

Raising the Stakes for

e-Sourcing

With so many complex challenges, it is no surprise that sourcing teams that

have been among the earliest and most enthusiastic adopters of sourcing

process automation (e-Sourcing) solutions. may be reaching a level of e-

Sourcing maturity that is outgrowing their early solution deployments.

In business environments, where entire product lifecycles can be as short as

a few years, anything that contributes to speed is a good thing. Of note is

that the very large-scale sourcing event referenced at the beginning of this

paper was completed in just over one month, representing a massive 65%

reduction in cycle time from the company's prior five-month average for

sourcing similar varieties and quantities of components.

Before upgrading to the advanced solution, the company would have been

forced to complete five or six separate e-Sourcing events to cover the same

ground.

Along with global ubiquity comes a need for true global reach in three key

areas: innovation, competitiveness and collaboration (both within a

company and externally with suppliers).

A

look at e-Sourcing specifications at the moment suggests the early adopters

are now craving more flexible solutions and more comprehensive e-Sourcing

functionality that can support truly global, end-to-end management and

control over well defined and well informed sourcing processes.

And, while it is well understood that e-Sourcing solution deployments can

yield substantial cycle-time reductions, a key driver of that 65%

improvement was the inherent scalability of the solution used, which

accommodates virtually unlimited numbers of line items and suppliers.

Global reach engenders true global

supplier and market price discovery and also dramatically expands and

improves the business intelligence available to procurement for such

mission-critical activities as target costing in new product development.

The remainder of this paper explores the e-Sourcing features and

functions that sourcing teams are specifying most frequently and

the benefits they are hoping to realize from the upgrades.

ACHIEVE MASSIVE CYCLE-TIME REDUCTION

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REACH INTO ALL REGIONS OF THE GLOBE

With Zycus’ iSource a large scale

sourcing event was completed in

just over one month, representing a

massive 65% reduction in cycle

time from the company's prior five-

month average for sourcing similar

varieties and quantities of

components.

To reach globally, sourcing teams want e-Sourcing solutions that

simultaneously empower them to:

Total cost of ownership (TCO) modeling is another area where sourcing

teams are pushing forward with e-Sourcing maturity. They want full-

featured solutions that empower them simultaneously to:

Flexibly model both BOMs and services cost breakdowns, sourcing

virtually all categories electronically,

Incorporate hard data regarding suppliers' quality, delivery and other

performance parameters into sourcing-decision models,

Invite engineering, production, logistics and other key personnel to

influence how various supplier performance and other factors get

weighed in sourcing decision making,

Dynamically analyze and refine weighting decisions in context of

information extracted from supply markets, and document,

demonstrate and validate for key stakeholders and executives the

mathematical and factual rigor of critical sourcing decisions.

What is more, sourcing teams want to be able to accomplish all of those

things without being forced to step outside their e-Sourcing solutions into

electronic spreadsheets or other applications that specialize in advanced

computation.

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Gather and structure large volumes of detailed information from

global bases of suppliers, including technology roadmaps,

manufacturing, process control, quality, inventory management,

information security, environmental sustainability, labor and

otherpractices, adherence to industry standards and government

regulations, diversity status, and key financial risk factors, to name

just a few

Involve maximum numbers of qualified suppliers from around the

globe in competitive bidding events and

Promote collaboration with suppliers and amongst globally

distributed networks of sourcing, engineering, manufacturing,

logistics, finance and other relevant company personnel

The sourcing teams want sophisticated capabilities for

processing massive quantities of data – accurately – within very short time

frames and for allocating business optimally among suppliers based on a

multitude of variables.

DRIVE TO REAL TCO MODELING & DECISION

MAKING

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While many e-Sourcing solutions

offer sophisticated modeling and

computing capabilities, very few

offer the full range, and even fewer

package advanced features in ways

that are both easy to access from

lower levels of e-Sourcing maturity

and fully extensible as procurement

organizations move up the e-

Sourcing maturity curve

Key e-Sourcing solution features that support

these objectives include :

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Unlimited event sizes and scopes

Multilingual user interface

24/7 secure web access

Best-in-class web security

Configurable workflow and permissions

control

Easy import/export from and to popular

desktop applications

One-to-many communications functions

such as forums

The eSourcing solution must enable the end user in,

Building valid, complex sourcing decision models

Exploring what-if scenarios

Modeling constraints for business-award optimizations

Process control plays a crucial role in producing reliable, high-quality

products that consistently delight consumers. Sourcing teams hence are

looking for e-Sourcing solutions with embedded project-management and

global monitoring functions that enable process-control principles to be

extended to their sourcing processes. They want solutions that empower

them to:

Codify specific best sourcing practices into workflows that can be

extended easily across multiple and globally distributed sourcing

operations, and

Gain enterprise-level visibility into statuses and process compliance

at all stages of all active sourcing programs.

In a similar vein,

For example, where a

factor such as information security is a critical concern, procurement

management wants to define and control a standard set of security hurdles

that all suppliers must clear rather than leaving the issue open for each

successive sourcing team to define and address in an uncontrolled manner.

e-Sourcing capabilities for creating and deploying standard sourcing-event

templates and for monitoring and managing sourcing program execution

are critical for achieving these objectives.

It is imperative that different types of information get synthesized into

sourcing event modeling and decision processes. Using historic spend data

to inform the process of identifying suppliers for competitive bidding is one

way to support such objectives. Historic spend data may also be applied to

ensure supply-base rationalization objectives are always factored into

business award and allocation decisions.

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sourcing teams looking to advance their e-Sourcing

maturity want capabilities that allow them to embed risk avoidance practices

upstream in sourcing processes rather than merely reacting to risk

downstream as it arises in operating supply chains.

DEPLOY & CONTROL SOURCING PROCESSES

GLOBALLY

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SYNTHESIZE BUSINESS INTELLIGENCE

e-Sourcing capabilities for creating

and deploying standard sourcing-

event templates and for monitoring

and managing sourcing program

execution are critical

Where market volatility comes into play, procurement teams want to be

able to integrate external market intelligence into sourcing decision making.

As a consequence of these requirements, sourcing teams are increasingly

looking at e-Sourcing solutions that integrate with both their up and

downstream procurement automation solutions such as spend analysis,

global market price/cost monitoring, supplier and contract management and

P2P.

Zycus expects that procurement leaders in the high tech-industries will

continue to move the meter forward on e-Sourcing maturity. To give their

companies a competitive edge, they are in hot pursuit of:

Massive sourcing cycle-time reductions

Truly global supplier and price/cost discovery

Consistent global deployment and execution of best sourcing

processes

Rapid collection, accurate synthesis and sophisticated use of

business intelligence

Risk avoidance

Sustainable cost competitiveness via early supplier involvement

and

Tight sourcing process control

For performance objectives such as product quality, speed to market and

supply risk minimization, an ability to integrate hard data around suppliers'

operational performance into business award decisions is a must-have

capability.

CPOs hoping to keep pace competitively should be asking if their current e-

Sourcing solutions have the potential and capabilities to yield the same set

of benefits.

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WIN COMPETITIVELY

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Use historic spend data to inform

the process of identifying suppliers

for competitive bidding and ensure

supply-base rationalization

objectives are always factored into

business award and allocation

decisions.

At Zycus we are 100% dedicated to positioning procurement at the heart of business performance. For more than a decade we have been the world's most trusted leader in Spend Analysis. With our spirit of innovation and a passion to help procurement create even greater business advantages, we have evolved our portfolio to a full suite of Procurement Performance Solutions — Spend Analysis, e-Sourcing, Contract Management, Supplier Management, Financial Savings Management and Procure-To-Pay.

Behind every Zycus solution stands an organization that possesses deep, detailed procurement expertise and a sharp focus on being responsive to customers. We are a large — 600+ and growing — company with a physical presence in virtually every major region of the globe. We see each customer as a partner in innovation and no client is too small to deserve our attention.

With more than 200 solution deployments among Global 1000 clients, we search the world continually for procurement practices proven to drive competitive business performance. We incorporate these practices into easy-to-use solutions that give procurement teams the power to get moving quickly — from any point of departure — and to continue innovating and pushing business and procurement performance to new heights.

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