Sourcing your way to better profits

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DeonMocke.JPGA report compiled by Ariba for SmartProcurement

In today’s economy, a strategic approach to sourcing and procurement is critical for meeting immediate needs as well as for achieving and sustaining long-term cost reductions. “Locating a supplier and pricing an item simply isn’t enough,” says Deon Mocke, Regional Vice President, Ariba Africa.

Sustainable savings come from identifying cost-cutting opportunities, defining and executing a supplier selection process, and creating contracts that convert them into actual savings. This requires being able to evaluate the total cost impact of sourcing decisions, while shortening the amount of time and effort spent on administrative tasks.

Effective supplier discovery and supplier information management are critical for the sourcing process to drive sustainable results. Engaging with suppliers strategically delivers a strategic competitive advantage that can yield new products, improved quality, better innovation, and much more.

Smart sourcing and procurement not only provides a cost advantage—it also allows your company to win more deals. It provides your business with the opportunity to become more profitable, which attracts a premium on shares. It also enables good corporate governance, which helps to maintain a solid reputation and value in the eyes of investors.

Strategic sourcing provides the single greatest opportunity to impact the cost, quality, and performance of the supply chain and is among the quickest paths to lower costs and improved revenues. But increased globalisation, soaring energy and commodity costs, and tightening supply markets have kept many companies from achieving their full sourcing potential.

You want best-value sourcing agreements—the kind that provide sustainable savings. That takes the right strategic sourcing environment, one that's connected to a powerful supplier network and built with superior tools, expertise, and information. Only then can you stimulate enough competition among qualified sellers to cut costs while minimising risks.

Reverse auctions allow sellers to compete for business on which they may never have had the opportunity to bid in the past. And the myths surrounding reverse auctions and online sourcing events—such as damaging supplier relationships or ending up with higher prices—are just that, myths. The reality is that strategic sourcing is a win-win scenario for both your business and suppliers.

For example, one company in the IT Hardware & Procurement industry that worked with Ariba received a total of 64 bids across five lots. The auction lasted a total of two hours and two minutes—including extensions—and achieved 35 per cent savings against the aggressive baseline.

Another company, in the Office Supplies industry, conducted an auction consisting of 50 bids across both lots that lasted an hour and 39 minutes, including extensions. The results speak for themselves: lot 1 achieved a 20 per cent saving from baseline, and 8 per cent incremental savings from the best negotiated manual quote; lot 2 achieved a best discount result of 52 per cent off vendor catalogue.

The Ariba Sourcing™ solution tightly integrates with the Ariba® Network to deliver the best sourcing events, as well as:

  • Connections to more than 730 000 suppliers.
  • Quick and easy supplier discovery.
  • Up-to-date supplier information.
  • Intuitive RFX tools for RFI, RFP, and auctions.
  • Patented competitive-bidding and timing options.
  • Automated and adjustable negotiation processes.
  • Access to Ariba’s sourcing partners, experts in category intelligence.

While it is important to leverage technology-based solutions to streamline procurement processes and savings across categories - proactively driving compliance is absolutely critical.

Ensuring compliance is the only way to guarantee that negotiated savings make their way to the bottom line. The effective procurement of goods and services requires a standard process followed by employees across an organization and an easy-to-use, consumer-like interface to facilitate it.

Control your spending, collaborate with suppliers, and contribute to the bottom line. Those are your top priorities in today’s economy.

Buying smarter isn’t just buying at the lowest price. It involves knowing everything about your company’s spending habits, and using that knowledge to be a stronger negotiator. It is being connected to a diverse network of high-quality suppliers, so you can quickly discover collaborative partners who can lower your costs for goods and services while minimising your risks. And it is contracting and procuring in ways that ensure compliance.

As the world’s business commerce network, Ariba combines cloud-based applications with a web-based trading community to help companies like yours discover and collaborate with a global network of partners. And the quick deployment and lack of maintenance associated with the SaaS solutions ensure that your company realises value quickly.

To learn more about how your company can employ a strategic sourcing initiative to improve the bottom line, contact Graeme Yates at gyates@ariba.com.

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