Raising the stakes for eSourcing

1
Raising the Stakes for e-Sourcing
www.zycus.com
2
Raising the
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.
Stakes for
e-Sourcing
Some of the unique challenges faced by sourcing
professionals are as follows
UNIQUE CHALLENGES
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.
Speed
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.
Global ubiquity
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.
High volume complexity
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.
Disintegration
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.
Transitory
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.
Volatility
3
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. 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.
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.
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.
ACHIEVE MASSIVE CYCLE-TIME REDUCTION
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.
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.
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.
REACH INTO ALL REGIONS OF THE GLOBE
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). 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.
4
To reach globally, sourcing teams want e-Sourcing
solutions that simultaneously empower them to
n 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

• Key e-Sourcing solution features that support
  these objectives include
• Unlimited event sizes and scopes

• Multilingual user interface

• 24/7 secure web access

• Best-in-class web security

• Configurable workflow and permissions control

n Involve maximum numbers of qualified
suppliers from around the globe in competitive
bidding events and

• Easy import/export from and to popular desktop
  applications

n Promote collaboration with suppliers and
amongst globally distributed networks of
sourcing, engineering, manufacturing, logistics,
finance and other relevant company personnel

• One-to-many communications functions such as
  forums

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
DRIVE TO REAL TCO MODELING DECISION MAKING
n Flexibly model both BOMs and services cost
breakdowns, sourcing virtually all categories
electronically,
n Incorporate hard data regarding suppliers'
quality, delivery and other performance
parameters into sourcing-decision models,
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
n 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.
n
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. 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.
5
The eSourcing solution must enable the end user
in, n Building valid, complex sourcing
decision models n Exploring what-if
scenarios n 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
DEPLOY CONTROL SOURCING PROCESSES GLOBALLY
n Codify specific best sourcing practices into
workflows that can be extended easily across
multiple and globally distributed sourcing
operations, and
e-Sourcing capabilities for creating and
deploying standard sourcing- event templates and
for monitoring and managing sourcing
program execution are critical
n Gain enterprise-level visibility into
statuses and process compliance at all stages of
all active sourcing programs.
In a similar vein, 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. 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.
SYNTHESIZE BUSINESS INTELLIGENCE
6
Where market volatility comes into play,
procurement teams want to be able to integrate
external market intelligence into sourcing
decision making. 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.
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.
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
WIN COMPETITIVELY
þ
Massive sourcing cycle-time reductions
þ
Truly global supplier and price/cost discovery
Consistent global deployment and execution of
best sourcing processes
þ
Rapid collection, accurate synthesis and
sophisticated use of business intelligence
þ
þ
Risk avoidance
Sustainable cost competitiveness via early
supplier involvement and
þ
þ
Tight sourcing process control
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.
7
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.
Z
About Zycus
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.
Princeton 103, Carnegie Center Suite 117,
Princeton, NJ 08540 Ph 609-799-5664 Chicago
5600 N.River Road Suite 800, Rosemont, 1L 60018.
Ph 847-993-3180 Atlanta 555 North Point Center
East 4th Floor, Alpharetta, GA 30022. Ph
678-366-5000
NORTH AMERICA
Frankfurt EPJ Business Center, Suite 418,
Mainzer Landstrasse, 27-31 60329 Frankfurt am
Main, Germany. Ph 49 (0) 69 27-4015-251, 49
(0) 172-614-4874, 49 (0) 69 27-4015-111
EUROPE
Paris 20, Bis rue Louis Philippe, 92200 Neuilly
sur Seine. Ph 33 (1) 393-58023 London Office
404, 4th floor, Albany House, 324/326 Regent
Street, London, W1B3HH. Ph 44 (0)800 6226561
Mumbai Plot No. GJ 07, Seepz, Seepz SEZ,
Andheri (East), Mumbai, Maharashtra 400 096 Ph
91-22-66407676
ASIA