Next Level Sourcing and Commodity Management
Advanced Sourcing Technologies and Platforms to Broaden a Portfolio
Julius Caesar’s role in transforming the Roman Republic into the Roman Empire was not simply a matter of timing. Caesar’s use of advanced technology and superior tactics in his invasion of Gaul (most of modern-day France and Germany), as well as his brazen ability to quickly learn from mistakes (e.g., his failed first invasion of modern-day England), helped to assure his place in Roman and military history. Moreover, Caesar’s capacity to swiftly adapt to his environment was crucial to his second campaign, when he attempted to conquer Britain. Learning from his failed prior attempt, he designed new ships that were more conducive to marine-style landings. He also drilled his legions in advanced tactics that took full advantage of contemporary cutting-edge technology. His opponents, by contrast, fought to the last soldier and came up short because they relied on far less strategic brute force methods of attack.
Caesar’s alacrity in advancing his own tactics and support platforms together with the emphasis he placed on leading, training and teaching his soldiers, proffers a central lesson for advancing sourcing and commodity management inside procurement organizations today. For companies in an early stage of procurement transformation, there’s much to be said about the implementation of effective, brute force methods of sourcing and commodity management. After all, for organizations that have previously done little to organize procurement, just about any approach to sourcing and commodity management (even something as basic as implementing a stage-gate strategic sourcing process and making selective use of reverse auctions) will likely generate some worthwhile results, at least on a one-time basis and possibly beyond. But as companies become more sophisticated in their sourcing and commodity management programs, it is essential to evolve from practices that simply generate one-time savings and more toward furthering a holistic approach.
As organizations begin to focus on maximizing implementable savings, sustainable results, total cost (vs. unit cost) orientation, supply risk reduction, the pursuit of more complicated categories, commodity volatility containment, and cost take-out—that extends beyond bid requests for existing specifications, among other areas—it becomes crucial to investigate higher level technologies and platforms to complement basic solutions. Sequentially, it is just as vital to make sure the sourcing “troops” know how to deploy their new battle strategies and tools most effectively.
Just as Caesar’s design and deployment of advanced platforms and campaign/fighting models enabled many high points of Roman military success, today’s leading procurement, finance, supply chain and engineering organizations are in a better place than ever to conquer their increasingly complex buying and commodity terrain. Performing diligent research to understand and implement the most appropriate tools with which to wage sourcing battles is the foundation for success. Just as Caesar’s legions practiced how to effectively use state-of- the-art technology before deploying it in the field (e.g., incendiary projectiles), companies must also study and vet all the sourcing and commodity options available to them.
This analysis will take a more detailed look at the additional capabilities that mature companies are deploying in today’s sourcing and commodity management arena. It will examine, among other things, the case for sourcing optimization outside of logistics (including both services and manufacturing) and commodity risk management platforms for tracking and managing hedging strategies, exposure, etc. We’ll also consider savings implementation/ tracking capabilities, total cost management and modeling tools and the integration of design/collaboration solutions into the sourcing and supplier management process. The tools discussed in this paper far transcend flaming arrows, but we trust that you’ll find them just as effective.