Trend Report: Strategic Sourcing 2012 Outlook


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Technology continues to transform the sourcing and procurement space, helping CPOs maximize efficiency and automate mundane tasks.

Early adoption of the right-sized mix of procurement technology has helped firms reduce overall costs and catalyze internal process optimization. Irrespective of their size, procurement organizations can benefit from this technology revolution, especially in light of efficiencies garnered by Cloud Computing.

This white paper will explain to you the top procurement technology trends you must know for 2012.

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Trend Report: Strategic Sourcing 2012 Outlook

  1. 1. TREND REPORTStrategic Sourcingand Procurement Outlook 2012 Copyright © 2012 GEP. All rights reserved.
  2. 2. TREND REPORT Leveraging strategic sourcing to achieve a balance between savings objectives, managing suppliers and supply chain risks is a widely discussed topic of interest. Procurement organizations are continuously looking for initiatives that deliver substantial bottom-line impact, while bringing about process enhancements. Based on the GEP experience, of working with Global 2000 clients, we have identified five key trends impacting Sourcing and Procurement plans in the near future. While 2011 was marked by geopolitical and fiscal challenges, we believe that 2012 will present opportunities for improvements. Strategic Sourcing and Procurement Outlook: Key trends to watch for in 2012 1. Procurement Automation: Cloud Adoption and Challenges Leading enterprises using strategic sourcing and procurement as enablers of margin expansion continue to invest in SaaS based solutions. Going forward, adoption of Cloud Computing based solutions is likely to increase exponentially. These solutions are free of complex installation processes and maintenance overheads. Tools such as e-Spend, e-RFX and e-Purchase led the shift from behind the firewall solutions to the SaaS based models. While SaaS adoption was driven by functional executives, Cloud Computing adoption is being driven by IT executives. However the shift from SaaS to Cloud, for modules covering confidential proprietary data such as Contracts, has traditionally met with resistance. Full services Procurement outsourcing providers will upgrade their technology solutions to help clients mitigate these Cloud data security concerns. As organizations come to terms with the flexibility, scalability and ease of integration with Cloud based solutions, we will see accelerated adoption. Mobile accessibility of procurement technology apps is also an area to watch for in the near future. 2. Risk Mitigation: Decoding the European Crisis Notwithstanding the fiscal lifelines, it is now reasonable to ask where the Euro is headed. Currency fluctuations and an impending threat of medium term inflation will require Procurement to engineer and upgrade contingency plans. With these plans, the leadership will expect to understand supply chain exposure and mitigate risk thereon, given one of the several scenarios that may unfold. Suppliers, based on their fiscal orientation, may request a shift to dollar (or other currencies) denominated contracts. Where a declining Euro is not favorable they may want to either hold negotiated contract prices or incentivize favorable payment cycles. The crisis may also present arbitrage opportunities in several categories. Enterprises will adapt their contingency plans to incorporate factors that maximize opportunities while minimizing risk. 3. Sustainable Sourcing: More than Just your Carbon Footprint Best-in-class procurement organizations continue to align their strategies and operations in compliance with globally standardized sustainability policies. In the context of strategic sourcing, sustainability compliance implies assuming ownership of a firms and its suppliers supply chains. Earlier this year, Apple announced that it will align its compliance objectives with those of the Fair Labor Association (FLA), a collaborative effort to improve working conditions in factories. Apples announcement and disclosures came on the back of bad press, highlighting less than appropriate conditions at supplier sites. P&G and Walmart have led the sustainable procurement drive from the front while others continue to set their own standards and strategies. 1
  3. 3. TREND REPORT In light of stringent regulation, enterprises are likely to invest substantial resources in ensuring compliance. However, going forward, they will review the role of external expertise, while demanding their procurement outsourcing provider offer sustainability compliance within their existing deliverables. At the same time, full service procurement outsourcing providers will continue to upgrade their offerings to focus on integrating a clients sustainability detail in their solutions. 4. Supplier Interaction: Leveraging Social Media to Connect with Suppliers Building relationships based on shared understanding is always a win-win situation for both buyers and suppliers. While traditional supplier management modules cover most aspects of tracking performance and assessing risk, enterprises have often found the need for engaging suppliers beyond just rewards, recognitions or joint planning groups. Sharing the business experience, interests and latest updates can offer valuable insight for both buyers and suppliers. P&G, for instance, unveiled a portal, which allows existing and prospective suppliers to connect beyond organizational boundaries. The social networking potential of such initiatives is likely to extend applications and levers critical to supplier management. The new challenges that will emerge with such platforms include management of the volume of information, while simultaneously protecting competitive edge and trade secrets. 5. Indirect Categories: Monitoring Effectiveness and Efficiency Indirect spend continues to offer unrealized potential for both leading enterprises, employing best-in- class sourcing programs, and those just beginning to address it more strategically. Increased focus on this segment comes with the objective of bringing more spend under management. Sub-categories within indirect procurement need a unique relationship and business approach that is different from direct procurement. These specialized requirements, of addressing indirect spend, are likely to bring about a paradigm shift in the procurement outsourcing space. As enterprises crystallize their strategy to address more spend under management, they will face challenges such as hiring specialized talent, getting stakeholder buy-in and effectively capturing the savings generated. Going forward, these needs will make way for intelligent outsourcing to third party providers. Traditionally, procurement outsourcing has been viewed within the confines of generating labor savings and hiving off the day-to-day transactional operations. While it offers that potential, specialist procurement outsourcing providers also provide services such as Tail-spend Management and Sourcing Support that allow for accelerated and sustainable returns on investment, while building value by improving processes. Long term relationships with the right outsourcing provider will then enable businesses to spend more resource bandwidth on crucial procurement tasks. 2
  4. 4. ® GEP (Global eProcure) is a leading procurement services firm dedicated to helping enterprises add value and reduce costs through procurement and supply chain transformation. With a comprehensive portfolio of services and solutions, GEP helps many of the worlds largest organizations uncover savings opportunities, and deliver these savings to the bottom line. We have managed over $50 billion of spend on behalf of these clients, across industry sectors and geographies. Our blended model combines management consulting, strategic sourcing support, implementation and outsourcing services with a full suite of best-in-class procurement tools and technology solutions. Our global footprint helps us to deliver these services wherever our clients need them. Headquartered in New Jersey, USA, we have offices in London (UK), Prague (Czech Republic), Mumbai & Hyderabad (India), Shanghai (China), São Paulo (Brazil) and Willoughby (Australia).100 Walnut Avenue, Clark, NJ 07066 | P 732.382.6565 | | www.gep.comCopyright © 2012 GEP. All rights reserved.