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Adding Advanced Sourcing to
SAP, Ariba and Oracle Environments




                           Copyright © 2012. CombineNet, Inc.
Speakers & Agenda

                                     Moderator: Greg Holt, Director of Product Marketing,
                                     CombineNet




                                     Constantine Limberakis, Senior Analyst, Supply
                                     Management, Aberdeen Group
                                      –   2012 Strategic Sourcing Benchmark Research Findings:
                                          Advanced Sourcing


                                     Jennifer Sikora, VP of Marketing, CombineNet
                                      – Company solutions for Advanced Sourcing in SAP, Ariba, and
                                        Oracle Environments
                                      – Customer Case Studies


                                     Q&A

Copyright © 2012. CombineNet, Inc.
Market Developments

            SAP announced acquisition of Ariba
            SAP, Oracle, and Ariba combine for nearly 50% of
            procurement software revenue (Source: Gartner, April
            2011)

            Solution gaps remain in Sourcing:
     “Other vendors remain in a league of their own and we encourage Ariba and
        SAP customers and prospects to explore whether or not advanced
        sourcing/optimization capability is important based on their internal skill
        sets, spend profile and willingness to embrace alternative sourcing and
        negotiation approaches; if so, alternatives should be given top priority until
        SAP and Ariba catch up in advanced sourcing areas.” – Spend Matters, May
            30, 2012



Copyright © 2012. CombineNet, Inc.
The Market Continues to Use Excel

            Polled 100 commercial organizations
            Conducted April-May 2011
            Not currently CombineNet customers
            Procurement, sourcing, and supply chain roles

                                                  Solutions Used to Support Sourcing
                                                          (select all that apply)
                         70%

                         60%

                         50%

                         40%

                         30%

                         20%

                         10%

                          0%
                                     Microsoft Excel      eSourcing &       Microsoft Word   Home-Grown Solutions
                                                       Procurement Suites


   Source: CombineNet Market Survey, May 2011

Copyright © 2012. CombineNet, Inc.
The Market Continues to Use Excel

            Polled 100 commercial organizations
            Conducted April-May 2011
            Not currently CombineNet customers
            Procurement, sourcing, and supply chain roles

                                                  Solutions Used to Support Sourcing
                                                          (select all that apply)
                         70%

                         60%

                         50%                                                          Still regularly use Excel for creating
                         40%                                                          RFPs and collecting bids:
                         30%

                         20%
                                                                                      ERP/Procurement Suite users = 74%
                         10%

                          0%
                                     Microsoft Excel      eSourcing &       Microsoft Word   Home-Grown Solutions
                                                       Procurement Suites


   Source: CombineNet Market Survey, May 2011

Copyright © 2012. CombineNet, Inc.
The Market Continues to Use Excel

            Polled 100 commercial organizations
            Conducted April-May 2011
            Not currently CombineNet customers
            Procurement, sourcing, and supply chain roles

                                                  Solutions Used to Support Sourcing
                                                          (select all that apply)
                         70%

                         60%

                         50%                                                          Still regularly use Excel for analyzing
                         40%                                                          bids:
                         30%

                         20%
                                                                                      ERP/Procurement Suite users = 85%
                         10%

                          0%
                                     Microsoft Excel      eSourcing &       Microsoft Word   Home-Grown Solutions
                                                       Procurement Suites


   Source: CombineNet Market Survey, May 2011

Copyright © 2012. CombineNet, Inc.
Excel Use Driven by ERP/Suite Limitations

       General sourcing tools designed for less strategic spends, smaller
                       scale, and low business impact.
             Limited data collection from suppliers
               – Non-price components of bids are poorly supported
               – Lacks robust Cost Model components
               – Supplier Capacity not considered
                Result: Price-focused RFPs that Leave Supplier Value and Innovation on the Table
             Limited support for size and scale
               – Smaller # of items/locations/suppliers (example: 1,000 bid elements = 200 items x
                 5 bid elements/item)
                Result: Forces Lotting/Bundling Strategies and Reduced-Scope Events that Fail to
                 Leverage Spend Volumes and Supplier Capabilities
             Very basic analytical capabilities
               – Lowest price/unit is often the deciding factor
               – Little ability to conduct “What if?” analysis
                Result: Awards that Don’t Meet Real-World Requirements; Missed Opportunities
                 for Savings and Innovation

Copyright © 2012. CombineNet, Inc.
Understanding “Advanced Sourcing”

            First-generation sourcing approaches only capturing up to
            30% of spend under management
              – Focus mainly on lowest-cost results
              – Simple RFPs
              – Traditional E-auctions
              – Complexities handled via workarounds



            Next-generation sourcing means:
              – Advanced sourcing processes that involve total cost analysis, risk
                management, optimization, and innovation
              – Improved e-sourcing technology to remove current limitations on
                categories supported and event size, scale and flexibility
              – Stronger influence and business results


Copyright © 2012. CombineNet, Inc.
AberdeenGroup’s Latest Benchmark:
Advanced Sourcing--Maximizing Savings
            Identification
                       Constantine Limberakis


Please note: All data findings included in this
presentation are early representations of the
Strategic Sourcing 2012 data pool.



                                                  Copyright © 2012. CombineNet, Inc.
Aberdeen Thoughts on SAP & ARIBA
 News provides an opportunity for organizations to
  reassess their current strategies
 Creates a new alignment of competitive marketplace

 Glaring redundancy and duplications of sourcing and
  contract management platforms for both on-Demand
  and on-premise components
 Hesitation on further deployment of existing sourcing
  platform
 Competitors reacting by providing discount to programs
  for signing up

                                                           10
Aberdeen’s Research Methodology

 Web-based / online benchmark survey (35 to 40
  questions)
 Analysis of data aggregate
 Dissection into Maturity Framework (Best-in-
  Class, Industry Average, and Laggard)
 Benchmark research reports
 5-to-7 page research derivatives (Analyst
  Insights, Sector Insights, etc.)
 Follow-up discussions with select end-users for quotes
  and case studies
 Webinars, assessment tools, social media, etc.




                                                           11
Latest Benchmark - Advanced Sourcing:
Maximizing Savings Identification
                           Job title: The research sample included respondents
                            with the following job titles: Manager (40%); Director
                            (28%); VP / EVP / SVP (4%); C-level / executive office
                            (3%), Consultants (8%), and Others (7%).

                           Industry: The research sample included respondents
                            from the following industries: health/medical/dental
                            (11%); industrial equipment/products (10%); financial
                            services (8%); education (6%); consumer packaged
                            goods (5%); and 28 others.

                           Geography: The majority of respondents (55%) were
                            from North America. Remaining respondents were from
                            the following regions; Europe (25%); Asia / Pacific
                            (10%); Middle East and Africa (3%); and South / Central
                            America (3%).

                           Company size: 25% of respondents were from very
                            large enterprises (annual revenues above US $5 billion);
                            27% were from large enterprises (annual revenues
                            between $1billion and $5 billion); 22% were from
                            midsize-large enterprises (annual revenues between
                            $50 million and $1billion); and 17% of respondents were
                            from small businesses (annual revenues of $50 million
                            or less).
                                                                                       12
Importance of Strategic Sourcing in your
organization
            Neutral role              No role
                4%                     3%




                 Moderately
                 significant                 Critical role
                    role                         34%
                    25%



                               Prominent
                                  role
                                  34%



                   (Percentage of survey respondents, n=146)




                                                               Source: AberdeenGroup, May 2012

                                                                                                 13
Formal Strategic Sourcing program

40%      37%
35%

30%                    29%

25%

20%
                                      15%
15%

10%                                                    9%

 5%                                                                     3%               3%              3%

 0%
      More than 5   3 to 5 years   1 to 2 years   Less than one   None yet, but      None yet, but   None planned
        years                                         year         budgeted to          under
                                                                  start within 12    consideration
                                                                     months

                                    (Percentage of survey respondents, n=146)



                                                                                Source: AberdeenGroup, May 2012

                                                                                                                    14
Top Benefits recognized with Strategic Sourcing


                Increased level of cost savings                                             72%




     Better alignment of sourcing and business
                                                                                   54%
                    objectives




       More robust management of key spend
                                                                                49%
                    categories



                                                  0%   10% 20% 30% 40% 50% 60% 70% 80%

                                    (Percentage of survey respondents, n=146)




                                                                                Source: AberdeenGroup, May 2012

                                                                                                                  15
Question: How do you improve this process?




      1    2    3    4    5    6   7




                                             16
Problem of eSourcing with just Traditional Means
 Evolution of Strategic Sourcing from being a
  savings concept to strategic importance
 Selection of suppliers beyond just cost criteria;
  need to adapt to complex, multi-variant scenarios
 Sourcing has been pulled into understanding the
  wider-organizational challenges
 Globalization creating inherent risks for managing
  supply chain
 Sustainability & CSR becoming more important
  factors in the context of strategic sourcing
                                                       17
Pressures related to Strategic Sourcing
   Corporate mandate to reduce cost / increase
                                                                                             69%
                   savings


  Need for more effective category management
                                                                            36%
             strategies / knowledge


         Need to improve sourcing performance                     21%


    Need to mitigate supplier risks due to supply
                                                                18%
                    disruptions


    Stakeholder pressure for measuring against
                                                             14%
          sustainable sourcing initiatives


                                                    0%   10% 20% 30% 40% 50% 60% 70% 80%

                                          (Percentage of survey respondents, n=146)




                                                                                Source: AberdeenGroup, May 2012

                                                                                                                  18
Key Capability Gaps in Strategic Sourcing


    Proactive data analytics for future                         27%
            sourcing projects                                                       50%



                                                                  29%
       Optimization of ideal suppliers                                                       Currently Implemented
                                                                                    50%
                                                                                             Plan to Implement



                                                                     33%
              Supply risk assessment
                                                                              43%


                                          0%    10%     20%    30%      40%    50%    60%

                                          (Percentage of survey respondents, n=146)



                                                                                      Source: AberdeenGroup, May 2012

                                                                                                                        19
The Best-in-Class Maturity Framework
        T able 1: Top Performers Earn Best-in-Class Status
            Definition of
                                         Mean Class Performance
           Maturity Class
                                76% - percent of total spending sourced using
           Best-in-Class:        a formal strategic sourcing process
              T op 20%          32% - percent total spending sourced based
             of aggregate        on sustainable strategic sourcing approaches
         performance scorers    16% - average yearly savings identified by
                                 sourcing team
                                54% - percent of total spending sourced using
         Industry Average:       a formal strategic sourcing process
             Middle 50%         21% - percent total spending sourced based
             of aggregate        on sustainable strategic sourcing approaches
         performance scorers    8% - average yearly savings identified by
                                 sourcing team
                                29% - percent of total spending sourced using
              Laggard:           a formal strategic sourcing process
            Bottom 30%          11% - percent total spending sourced based
             of aggregate        on sustainable strategic sourcing approaches
         performance scorers    4% - average yearly savings identified by
                                 sourcing team
        Source: Aberdeen Group, May



                                                                    Source: AberdeenGroup, May 2012

                                                                                                      20
Organizational structure to address strategic
sourcing
      Centralized sourcing team that manages all                                                     46%
               strategic sourcing projects                                    20%

 Centralized or shared services sourcing team in                                21%
 conjunction with business unit or regional teams                            17%

        Formal company-wide sourcing or supply                              21%
                 management group                                        16%

  Centralized or shared services sourcing team                    8%                    Best-in-Class
with power users dispersed across the enterprise                       12%
                                                                                        All Others
  Formal sourcing or supply management group                 4%
resides within individual business units or regions                          18%


                  No formal sourcing organization       0%
                                                                   11%

                                                      0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%




                                                                                      Source: AberdeenGroup, May 2012

                                                                                                                        21
Groups collaborating with Sourcing Team
                    Finance (CFO)                                          92%
                                                                  68%

                 Operations (COO)                                       79%
                                                                     72%

     Product development (VP PD)                                 67%
                                                       43%

                           IT (CIO)                              63%
                                                               57%
                                                                                   Best-in-Class
          Manufacturing (VP SCM)                                63%
                                                          49%                      All Others

            Executive office (CEO)                             58%
                                                       42%

     Sales / Marketing (CSO/ CMO)                              58%
                                                         44%

         Sustainability office (CSO)                33%
                                                  27%

                                       0%   20%    40%    60%        80%   100%

                              (Percentage of survey respondents, n=146)


                                                                           Source: AberdeenGroup, May 2012

                                                                                                             22
Capability Gaps with Best-in-Class

   Cross-functional coordination with line of                                           88%
       business and sourcing groups                                            67%
                                                               33%

        Cross-functional coordination with                                             83%
                                                                               63%
     finance, product, and sourcing groups                    30%

   Ability to collect spend data from multiple                                        79%          Best-in-Class
                                                                         55%
                      sources                                28%                                   Industry Average
                                                                                                   Laggards
                                                                                67%
    Ability to enrich spend and supplier data                     37%
                                                            24%

    Commodity councils actively engaged in                                     63%
                                                               33%
             sourcing process                          15%

                                                 0%   20%      40%      60%      80%        100%

                                   (Percentage of survey respondents, n=146)


                                                                                Source: AberdeenGroup, May 2012

                                                                                                                      23
Top Six (6) Stated Sourcing Strategies

 80%    75%
                       71%
 70%                                   67%    67%
                                                       63%            63%
              59%                                                                   58%
 60%
                                                                            54%
                                                                                          51%
 50%
                              42%
 40%
                                                             31%                                  Best-in-Class
 30%                                                                                              All Others

 20%

 10%

  0%
       Total Cost of Matrix or tiered Payment terms Optimization     Multi-stage   Total Landed
        Ownership        pricing                                      sourcing         Cost

                                    (Percentage of survey respondents, n=146)



                                                                                Source: AberdeenGroup, May 2012

                                                                                                                  24
Strategic Sourcing versus eSourcing

                                                                               62%
                        IT hardware
                                                           27%


                                                                         51%
  Transportation / logistics services
                                                         23%


                                                                   40%
                   Temporary labor
                                                   15%

                                                                         Strategically-Source
                                                     21%
                     Legal services                                      Using eSourcing
                                              8%


                                        0%   10%   20%    30%    40%   50%   60%    70%




                                                                                   Source: AberdeenGroup, April 2012

                                                                                                                       25
Percent of Spend through eSourcing

   40%
                               35%                                                               Best-in-Class
   35%    33%
                29%                                                                              Industry Average
   30%                               29%             28% 27%                 28%
                                                                                                 Laggards
   25%                                                                             22%
   20%

   15%                12%
                                         9%                      9%                      10%
   10%

   5%

   0%
         % of total spend   % of direct materials   % of total non-        % of total services
                                   spend          production / indirect          spend
                                                    materials spend
                               (Percentage of survey respondents, n=146)




                                                                              Source: AberdeenGroup, May 2012

                                                                                                                    26
Automated Sourcing Attributes
                                                                     33%
                  Event management                                      36%
                                                 9%
                                                                         38%
                      Event templates                                      40%
                                                    13%
                                                                             42%
                       Event creation                                       40%
                                                  9%                                           Best-in-Class
                                                                                 46%           Industry Average
     Bidding collection / aggregation                                   37%                    Laggards
                                                    11%
                                                                                 46%
            Event analysis / reporting
                                                                     33%
                                                    11%
                                                                                   50%
  Sourcing optimization / bid analysis
                                                               26%
                                               7%

                                         0%   10%      20%     30%     40%       50%     60%

                                    (Percentage of survey respondents, n=146)



                                                                                 Source: AberdeenGroup, May 2012

                                                                                                                   27
Preferred Deployment Approach for
eSourcing
   Deployed on-demand, Software-as-a-                                                  46%
             Service (SaaS)                                                 36%


                                                                    29%
                  Installed on-premise
                                                                  25%
                                                                                             Best-in-Class
                                                        13%                                  All Others
         Hosted by a 3rd party provider
                                                        13%


                                                   8%
                        No preference
                                                           17%


                                          0%     10%      20%      30%      40%        50%

                                           (Percentage of survey respondents, n=146)




                                                                             Source: AberdeenGroup, May 2012

                                                                                                               28
Key Criteria for eSourcing Selection

                                                                                42%
               Ease of use (usability)
                                                                              39%
    Ease of integration with back-end                                          42%
       systems (ERP, MRP, PLM)                               23%
                                                                          38%
                    Core functionality                                   37%
   Ease of integration with upstream                            29%
              spend areas                                 21%                            Best-in-Class
                                                             25%                         Others
   Advanced functionalities within the
        eSourcing application                                  28%
    Solution provider experience (i.e.                        25%
                industry)                              16%
   Complementary sourcing services                            25%
    available from solution provider          6%

                                         0%   10%     20%      30%      40%       50%

                                  (Percentage of survey respondents, n=146)




                                                                                Source: AberdeenGroup, May 2012

                                                                                                                  29
Recommendations for Action
 Continue to invest in diverse skills and capabilities on the
  strategic sourcing teams
 Improve supplier assessment capabilities for strategic
  sourcing efforts
 Develop the ability to enrich spend and supplier data for
  use in sourcing
 Improve the usage of optimization tools and techniques

 Increase the use automation in strategic sourcing tools
  particularly for complex spend
 Implement sustainable/csr sourcing strategies across
  more categories
                                                                 30
CombineNet Advanced Sourcing
 Solution & Customer Results




                       Copyright © 2012. CombineNet, Inc.
Strategic Sourcing Not Constrained by
  Technology…
            “What We Have is Working Good Enough.”

            You can drive clear improvements where sourcing
            involves any of the following:
              – Business-critical spends/categories
              – Larger-sized RFPs
              – Non-price data that must be collected and analyzed
              – Supplier collaboration
              – Risk mitigation
              – Multiple decision stakeholders before awarding
              – Deeper analytics needed at faster speed
              – Aggregation of regional or lotted spends
              – Improved e-sourcing cycle times (speed, productivity)



Copyright © 2012. CombineNet, Inc.
CombineNet Company Overview

           The Company                   The Technology                 Customer Value

 Established in 2000.                Best of Breed Solutions that   Capture >2X spend under E-
                                     improve Strategic Sourcing.    Sourcing management
 Global: Offices in                  21 U.S. Patents.
 Pittsburgh, PA; London, UK;                                        Manage supply risk with
 Hamburg, Germany.                   Software-as-a-Service (SaaS)   Cost-Risk-Benefit analysis
 Partners for Latin                  delivery model for ease of
 America, Middle East, APAC          adoption and scale             Fast implementation and
                                                                    broad adoption for any type
 Customers: Global 2000              Easy integration into your     of user
 spanning CPG, Food &                environment to complement
 Bev, Retail, Manufacturing,         existing applications          Nearly 100% see full payback
 Transportation, and more                                           after 1st sourcing event




Copyright © 2012. CombineNet, Inc.
CombineNet ASAP® for Advanced Sourcing

                                                        Key Differentiators:
     SaaS-based Best-of-Breed product used
                                                 Optimization Engine handles extensive
     by sourcing teams and their suppliers.
                                                 data inputs; 21 patents.
     Speeds, simplifies, and centralizes the
                                                 Scenario Builder enables rapid and
     creation and management of sourcing         advanced ‘what-if’ analysis.
     events of any size, scale, or complexity.
                                                 Expressive Bidding® supports an
     For any spend category (direct              expressive, collaborative marketplace
     materials, indirect                         between buyers and suppliers.
     materials, transportation, services).
                                                 Fast Implementation – 1 ½ day
     Complements and enhances existing           training, quick-start wizards, template
     solutions and processes.                    uploads, event editing, etc. enable
                                                 fast, smooth adoption, and immediate
                                                 ROI.

Copyright © 2012. CombineNet, Inc.
Our Advanced Sourcing Product: ASAP®

                      Create                 Bid           Analyze & Award
                       RFxpress
                                                            Scenario BuilderSM
                     (RFI, RFP, E-
                       Auction)      Expressive Bidding®
                                                              Optimization
                       Templates     Expressive Feedback       Reporting &
                                                               Dashboards
                 Event Quick-Start

                                     CombineNet ASAP




Copyright © 2012. CombineNet, Inc.
Typical CombineNet Customer
         70% of Customers Use CombineNet ASAP alongside ERP/Suites
               Already have ERP/E-Sourcing Suite in place, but:
                 – Multiple categories unaddressed by E-Sourcing – need a more
                   flexible, robust technology solution to support.
                 – Reached a savings plateau in mature categories – need more
                   innovative E-Sourcing to drive savings.
                 – Struggle with bid analytics – need ability to identify best
                   sourcing decision based on “what if?” scenarios.

               Selected or are in process of implementing
               ERP/Suite, but:
                 – Significant sourcing events are on the horizon
                 – Need near-term value creation for supply chains

Copyright © 2012. CombineNet, Inc.
We Do this for Companies Just Like Yours

              A Wide Variety of Customers across All Industries




Copyright © 2012. CombineNet, Inc.
Where Do Our Customers Use Us Today?
                                                  Across All Spend Categories:
                                           Direct, Indirect, Transportation, Packaging, Services
                                                - Spends Sourced (sampling) -
                    Chemicals            Capital Expenses      Air Freight        Bottles/Vials    Advertising
                    Commodities          Construction Mat’s    Drayage            Cans             Facility Services
                    Fats & Oils          Displays              Ocean              Cartons          Labor
                    Food Ingredients     Fleet Vehicles        LTL                Corrugate        Legal Services
                    Raw Materials        Office Supplies       Parcel             Flexible Films   Meetings
                    Resins               Marketing/Media       Truckload          Printed Labels   Printing
                    Steel                Telecom               Rail/Intermodal    Secondary Pkg    Treasury/Finance



 From the Routine…
 - 51% had <100 items


                                     … To the Complex
                                      20% had >1,000 items
                                      20% had >50 suppliers
                                      18% had >10,000 bids
                                                                                                              Based on FY2011 data



Copyright © 2012. CombineNet, Inc.
Large European Conglomerate

                                                       $ Billion in Spend Managed
       Customer Profile:                                          Annually
         >1,000 e-sourcing events                  8
         annually                                  7
         Ariba user since 2007                     6
         Adopted CombineNet in January             5
         2011                                      4
         More than 2X Increase in                  3
         Corporate Spend Managed via E-            2
         Sourcing in year 2 with
                                                   1
         CombineNet ASAP
                                                   0
                                                        2010        2011       2012
                      $7.5 Billion E-Sourced
                             in 2012
                                     (projected)
                                                         Ariba             CombineNet


Copyright © 2012. CombineNet, Inc.
Case Study – Foodservice Operator

     Client Profile:
                                                    First Event:
        CombineNet and Ariba User                  ROI: >100X
                                               Payback : Immediate
            CombineNet Details
              – Implementation: < 1 wk
              – Training: 1 day
                                              Sample Categories in First 6
              – In the first 6 months:        Months Using CombineNet
                          10 Events Opened   Bags            Bread
                          9 Awarded          Eggs            Buns
                                              Tortillas       Bakery Needs
                                              Chicken         Distribution



Copyright © 2012. CombineNet, Inc.
Case Study – Foodservice Operator
  (continued)
   Opportunity:
     2 RFPs run in existing
     suite
           – Analyzed for 2 weeks &
                 awarded manually
         Loaded same data into
         CombineNet
           – Analyzed multiple possible
                 award options in a few
                 hours (all in the product)
   Result:
         2X in savings
         2 weeks in time savings

Copyright © 2012. CombineNet, Inc.
Case Study – Major U.S. Retailer

   Client Profile:
      Customer using ERP procurement solution and CombineNet
      CombineNet Details
                                            Sample Categories in First 6
           – Implementation: < 1 mo                  Months
           – Training: 1 day               Ocean Freight    Air Freight
                                           Recycled         Trash Removal
           – Ran >8 events in CombineNet   Corrugate        Network
            in first 6 months              Treasury         Batteries
                                           Services




Copyright © 2012. CombineNet, Inc.
Changing the Way You Think about e-Sourcing



             Existing Tools Are Limiting Your
             Sourcing Strategy
               – Restrictions on size and scope
                 require lotting, or breaking
                 events into smaller pieces
               – Rigid bidding mechanisms
                 deprive you of supplier            Don’t let your
                 innovation and value creation
                                                  technology define
               – Price-focused analysis reduces
                 options for real change            your strategy!


Copyright © 2012. CombineNet, Inc.
Advanced Sourcing Helps Reduce Supply Risk

         Cost-Risk-Benefit Decision Making
         Identify and evaluate the risk factors of
         your supply decisions, and understand
         the cost impact of risk mitigation
         strategies


                                                      Geographical Risk Mitigation Example
                                                      Limit Japanese supply volume to 25%
                                                      Limit S. Korea supply volume to 40% per
                                                      plant
                                                      At least 30% supply from China for each
                                                      item



           There is a cost tradeoff for every
           decision; Optimization helps you
           quantify the cost-risk-benefit


Copyright © 2012. CombineNet, Inc.
Advanced Sourcing Drives Next-Generation
  E-Sourcing Value

            Conquer Complex Spend Categories
            Proven results provide confidence in
            conducting the largest and most complex
            e-sourcing events



                                                      Improve Results in Mature Spend
                                                      Categories
                                                      Get beyond “savings plateaus” with
                                                      advanced capabilities to find new
                                                      supplier-driven savings and efficiencies



            Speed Up the e-Sourcing Process
            Quick on-boarding and faster time-to-
            award improves sourcing team
            productivity and Return on Procurement


Copyright © 2012. CombineNet, Inc.
CombineNet ASAP Provides a Clear Path to
  Execute Your Sourcing Strategy
   Execute Any Bidding Strategy with the Most
      Flexible and Scalable RFX platform
            – Unlimited event size and scope
            – Robust options for RFI, RFP, E-Auction event types
            – Expressive Bidding® for price and non-price bid
              elements, supplier information, innovation, and
              value-add

                                                 Explore All of Your Options with Industry-
                                                 Leading Bid Analysis
                                                   – Fast, easy “What If?” scenario optimization
                                                   – Combine RFI, RFP/Q, E-Auction
                                                     responses, business preferences and constraints
                                                     for a complete understanding of sourcing
                                                     decisions
                                                   – Uncover hidden savings opportunities and find
                                                     the best sourcing solution faster

Copyright © 2012. CombineNet, Inc.
Fast Value Creation – Speed to ROI


      Nearly all customers get         Rapid on-boarding and
      100%+ payback after first       implementation = online
      CombineNet ASAP event               bidding in days



          Across ALL spends:
                                     80% of our customers use
          Average 10% savings
                                      us to fill gaps in existing
           against spend size
                                       e-Sourcing/ERP suites
            (ranges of 5-60%)



Copyright © 2012. CombineNet, Inc.
Strategic Sourcing Not Constrained by
  Technology…
            “What We Have is Working Good Enough.”

            You can drive clear improvements where sourcing
            involves any of the following:
              – Business-critical spends/categories
              – Larger-sized RFPs
              – Non-price data that must be collected and analyzed
              – Supplier collaboration
              – Risk mitigation
              – Multiple decision stakeholders before awarding
              – Deeper analytics needed at faster speed
              – Aggregation of regional or lotted spends
              – Improved e-sourcing cycle times (speed, productivity)



Copyright © 2012. CombineNet, Inc.
What Next?

            Look for an email with:
              – Copy of the Aberdeen 2012 Sourcing Benchmark
                Report
              – Link to CombineNet ASAP® for Advanced Sourcing
                White Paper


            Contact Us to compare results for key spends:
              – info@combinenet.com
              – Jennifer.sikora@combinenet.com
              – www.combinenet.com




Copyright © 2012. CombineNet, Inc.
Reach Out!
 Twitter: @ABG_SpendMngmt
 LinkedIn: http://www.linkedin.com/in/climberakis

   Aberdeen Group GSM Research Group
      Aberdeen Group GSM Research Advisory Council (RAC)


   Aberdeen Research Blog: blogs.aberdeen.com




                                                            50
Thank You.
              Questions & Discussion
Jennifer Sikora               Constantine Limberakis
Vice President of Marketing   Senior Research Analyst
CombineNet, Inc.              AberdeenGroup
www.combinenet.com            www.aberdeen.com
                              constantine.limberakis@aberdeen.com
info@combinenet.com           Twitter: @ABG_SpendMngmt
Phone: +1 877-293-5480        Phone: +1.312.470.6071



                                         Copyright © 2012. CombineNet, Inc.

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CombineNet: Adding Advanced Sourcing to SAP, Ariba, and Oracle Environments

  • 1. Adding Advanced Sourcing to SAP, Ariba and Oracle Environments Copyright © 2012. CombineNet, Inc.
  • 2. Speakers & Agenda Moderator: Greg Holt, Director of Product Marketing, CombineNet Constantine Limberakis, Senior Analyst, Supply Management, Aberdeen Group – 2012 Strategic Sourcing Benchmark Research Findings: Advanced Sourcing Jennifer Sikora, VP of Marketing, CombineNet – Company solutions for Advanced Sourcing in SAP, Ariba, and Oracle Environments – Customer Case Studies Q&A Copyright © 2012. CombineNet, Inc.
  • 3. Market Developments SAP announced acquisition of Ariba SAP, Oracle, and Ariba combine for nearly 50% of procurement software revenue (Source: Gartner, April 2011) Solution gaps remain in Sourcing: “Other vendors remain in a league of their own and we encourage Ariba and SAP customers and prospects to explore whether or not advanced sourcing/optimization capability is important based on their internal skill sets, spend profile and willingness to embrace alternative sourcing and negotiation approaches; if so, alternatives should be given top priority until SAP and Ariba catch up in advanced sourcing areas.” – Spend Matters, May 30, 2012 Copyright © 2012. CombineNet, Inc.
  • 4. The Market Continues to Use Excel Polled 100 commercial organizations Conducted April-May 2011 Not currently CombineNet customers Procurement, sourcing, and supply chain roles Solutions Used to Support Sourcing (select all that apply) 70% 60% 50% 40% 30% 20% 10% 0% Microsoft Excel eSourcing & Microsoft Word Home-Grown Solutions Procurement Suites Source: CombineNet Market Survey, May 2011 Copyright © 2012. CombineNet, Inc.
  • 5. The Market Continues to Use Excel Polled 100 commercial organizations Conducted April-May 2011 Not currently CombineNet customers Procurement, sourcing, and supply chain roles Solutions Used to Support Sourcing (select all that apply) 70% 60% 50% Still regularly use Excel for creating 40% RFPs and collecting bids: 30% 20% ERP/Procurement Suite users = 74% 10% 0% Microsoft Excel eSourcing & Microsoft Word Home-Grown Solutions Procurement Suites Source: CombineNet Market Survey, May 2011 Copyright © 2012. CombineNet, Inc.
  • 6. The Market Continues to Use Excel Polled 100 commercial organizations Conducted April-May 2011 Not currently CombineNet customers Procurement, sourcing, and supply chain roles Solutions Used to Support Sourcing (select all that apply) 70% 60% 50% Still regularly use Excel for analyzing 40% bids: 30% 20% ERP/Procurement Suite users = 85% 10% 0% Microsoft Excel eSourcing & Microsoft Word Home-Grown Solutions Procurement Suites Source: CombineNet Market Survey, May 2011 Copyright © 2012. CombineNet, Inc.
  • 7. Excel Use Driven by ERP/Suite Limitations General sourcing tools designed for less strategic spends, smaller scale, and low business impact. Limited data collection from suppliers – Non-price components of bids are poorly supported – Lacks robust Cost Model components – Supplier Capacity not considered  Result: Price-focused RFPs that Leave Supplier Value and Innovation on the Table Limited support for size and scale – Smaller # of items/locations/suppliers (example: 1,000 bid elements = 200 items x 5 bid elements/item)  Result: Forces Lotting/Bundling Strategies and Reduced-Scope Events that Fail to Leverage Spend Volumes and Supplier Capabilities Very basic analytical capabilities – Lowest price/unit is often the deciding factor – Little ability to conduct “What if?” analysis  Result: Awards that Don’t Meet Real-World Requirements; Missed Opportunities for Savings and Innovation Copyright © 2012. CombineNet, Inc.
  • 8. Understanding “Advanced Sourcing” First-generation sourcing approaches only capturing up to 30% of spend under management – Focus mainly on lowest-cost results – Simple RFPs – Traditional E-auctions – Complexities handled via workarounds Next-generation sourcing means: – Advanced sourcing processes that involve total cost analysis, risk management, optimization, and innovation – Improved e-sourcing technology to remove current limitations on categories supported and event size, scale and flexibility – Stronger influence and business results Copyright © 2012. CombineNet, Inc.
  • 9. AberdeenGroup’s Latest Benchmark: Advanced Sourcing--Maximizing Savings Identification Constantine Limberakis Please note: All data findings included in this presentation are early representations of the Strategic Sourcing 2012 data pool. Copyright © 2012. CombineNet, Inc.
  • 10. Aberdeen Thoughts on SAP & ARIBA  News provides an opportunity for organizations to reassess their current strategies  Creates a new alignment of competitive marketplace  Glaring redundancy and duplications of sourcing and contract management platforms for both on-Demand and on-premise components  Hesitation on further deployment of existing sourcing platform  Competitors reacting by providing discount to programs for signing up 10
  • 11. Aberdeen’s Research Methodology  Web-based / online benchmark survey (35 to 40 questions)  Analysis of data aggregate  Dissection into Maturity Framework (Best-in- Class, Industry Average, and Laggard)  Benchmark research reports  5-to-7 page research derivatives (Analyst Insights, Sector Insights, etc.)  Follow-up discussions with select end-users for quotes and case studies  Webinars, assessment tools, social media, etc. 11
  • 12. Latest Benchmark - Advanced Sourcing: Maximizing Savings Identification  Job title: The research sample included respondents with the following job titles: Manager (40%); Director (28%); VP / EVP / SVP (4%); C-level / executive office (3%), Consultants (8%), and Others (7%).  Industry: The research sample included respondents from the following industries: health/medical/dental (11%); industrial equipment/products (10%); financial services (8%); education (6%); consumer packaged goods (5%); and 28 others.  Geography: The majority of respondents (55%) were from North America. Remaining respondents were from the following regions; Europe (25%); Asia / Pacific (10%); Middle East and Africa (3%); and South / Central America (3%).  Company size: 25% of respondents were from very large enterprises (annual revenues above US $5 billion); 27% were from large enterprises (annual revenues between $1billion and $5 billion); 22% were from midsize-large enterprises (annual revenues between $50 million and $1billion); and 17% of respondents were from small businesses (annual revenues of $50 million or less). 12
  • 13. Importance of Strategic Sourcing in your organization Neutral role No role 4% 3% Moderately significant Critical role role 34% 25% Prominent role 34% (Percentage of survey respondents, n=146) Source: AberdeenGroup, May 2012 13
  • 14. Formal Strategic Sourcing program 40% 37% 35% 30% 29% 25% 20% 15% 15% 10% 9% 5% 3% 3% 3% 0% More than 5 3 to 5 years 1 to 2 years Less than one None yet, but None yet, but None planned years year budgeted to under start within 12 consideration months (Percentage of survey respondents, n=146) Source: AberdeenGroup, May 2012 14
  • 15. Top Benefits recognized with Strategic Sourcing Increased level of cost savings 72% Better alignment of sourcing and business 54% objectives More robust management of key spend 49% categories 0% 10% 20% 30% 40% 50% 60% 70% 80% (Percentage of survey respondents, n=146) Source: AberdeenGroup, May 2012 15
  • 16. Question: How do you improve this process? 1 2 3 4 5 6 7 16
  • 17. Problem of eSourcing with just Traditional Means  Evolution of Strategic Sourcing from being a savings concept to strategic importance  Selection of suppliers beyond just cost criteria; need to adapt to complex, multi-variant scenarios  Sourcing has been pulled into understanding the wider-organizational challenges  Globalization creating inherent risks for managing supply chain  Sustainability & CSR becoming more important factors in the context of strategic sourcing 17
  • 18. Pressures related to Strategic Sourcing Corporate mandate to reduce cost / increase 69% savings Need for more effective category management 36% strategies / knowledge Need to improve sourcing performance 21% Need to mitigate supplier risks due to supply 18% disruptions Stakeholder pressure for measuring against 14% sustainable sourcing initiatives 0% 10% 20% 30% 40% 50% 60% 70% 80% (Percentage of survey respondents, n=146) Source: AberdeenGroup, May 2012 18
  • 19. Key Capability Gaps in Strategic Sourcing Proactive data analytics for future 27% sourcing projects 50% 29% Optimization of ideal suppliers Currently Implemented 50% Plan to Implement 33% Supply risk assessment 43% 0% 10% 20% 30% 40% 50% 60% (Percentage of survey respondents, n=146) Source: AberdeenGroup, May 2012 19
  • 20. The Best-in-Class Maturity Framework T able 1: Top Performers Earn Best-in-Class Status Definition of Mean Class Performance Maturity Class  76% - percent of total spending sourced using Best-in-Class: a formal strategic sourcing process T op 20%  32% - percent total spending sourced based of aggregate on sustainable strategic sourcing approaches performance scorers  16% - average yearly savings identified by sourcing team  54% - percent of total spending sourced using Industry Average: a formal strategic sourcing process Middle 50%  21% - percent total spending sourced based of aggregate on sustainable strategic sourcing approaches performance scorers  8% - average yearly savings identified by sourcing team  29% - percent of total spending sourced using Laggard: a formal strategic sourcing process Bottom 30%  11% - percent total spending sourced based of aggregate on sustainable strategic sourcing approaches performance scorers  4% - average yearly savings identified by sourcing team Source: Aberdeen Group, May Source: AberdeenGroup, May 2012 20
  • 21. Organizational structure to address strategic sourcing Centralized sourcing team that manages all 46% strategic sourcing projects 20% Centralized or shared services sourcing team in 21% conjunction with business unit or regional teams 17% Formal company-wide sourcing or supply 21% management group 16% Centralized or shared services sourcing team 8% Best-in-Class with power users dispersed across the enterprise 12% All Others Formal sourcing or supply management group 4% resides within individual business units or regions 18% No formal sourcing organization 0% 11% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Source: AberdeenGroup, May 2012 21
  • 22. Groups collaborating with Sourcing Team Finance (CFO) 92% 68% Operations (COO) 79% 72% Product development (VP PD) 67% 43% IT (CIO) 63% 57% Best-in-Class Manufacturing (VP SCM) 63% 49% All Others Executive office (CEO) 58% 42% Sales / Marketing (CSO/ CMO) 58% 44% Sustainability office (CSO) 33% 27% 0% 20% 40% 60% 80% 100% (Percentage of survey respondents, n=146) Source: AberdeenGroup, May 2012 22
  • 23. Capability Gaps with Best-in-Class Cross-functional coordination with line of 88% business and sourcing groups 67% 33% Cross-functional coordination with 83% 63% finance, product, and sourcing groups 30% Ability to collect spend data from multiple 79% Best-in-Class 55% sources 28% Industry Average Laggards 67% Ability to enrich spend and supplier data 37% 24% Commodity councils actively engaged in 63% 33% sourcing process 15% 0% 20% 40% 60% 80% 100% (Percentage of survey respondents, n=146) Source: AberdeenGroup, May 2012 23
  • 24. Top Six (6) Stated Sourcing Strategies 80% 75% 71% 70% 67% 67% 63% 63% 59% 58% 60% 54% 51% 50% 42% 40% 31% Best-in-Class 30% All Others 20% 10% 0% Total Cost of Matrix or tiered Payment terms Optimization Multi-stage Total Landed Ownership pricing sourcing Cost (Percentage of survey respondents, n=146) Source: AberdeenGroup, May 2012 24
  • 25. Strategic Sourcing versus eSourcing 62% IT hardware 27% 51% Transportation / logistics services 23% 40% Temporary labor 15% Strategically-Source 21% Legal services Using eSourcing 8% 0% 10% 20% 30% 40% 50% 60% 70% Source: AberdeenGroup, April 2012 25
  • 26. Percent of Spend through eSourcing 40% 35% Best-in-Class 35% 33% 29% Industry Average 30% 29% 28% 27% 28% Laggards 25% 22% 20% 15% 12% 9% 9% 10% 10% 5% 0% % of total spend % of direct materials % of total non- % of total services spend production / indirect spend materials spend (Percentage of survey respondents, n=146) Source: AberdeenGroup, May 2012 26
  • 27. Automated Sourcing Attributes 33% Event management 36% 9% 38% Event templates 40% 13% 42% Event creation 40% 9% Best-in-Class 46% Industry Average Bidding collection / aggregation 37% Laggards 11% 46% Event analysis / reporting 33% 11% 50% Sourcing optimization / bid analysis 26% 7% 0% 10% 20% 30% 40% 50% 60% (Percentage of survey respondents, n=146) Source: AberdeenGroup, May 2012 27
  • 28. Preferred Deployment Approach for eSourcing Deployed on-demand, Software-as-a- 46% Service (SaaS) 36% 29% Installed on-premise 25% Best-in-Class 13% All Others Hosted by a 3rd party provider 13% 8% No preference 17% 0% 10% 20% 30% 40% 50% (Percentage of survey respondents, n=146) Source: AberdeenGroup, May 2012 28
  • 29. Key Criteria for eSourcing Selection 42% Ease of use (usability) 39% Ease of integration with back-end 42% systems (ERP, MRP, PLM) 23% 38% Core functionality 37% Ease of integration with upstream 29% spend areas 21% Best-in-Class 25% Others Advanced functionalities within the eSourcing application 28% Solution provider experience (i.e. 25% industry) 16% Complementary sourcing services 25% available from solution provider 6% 0% 10% 20% 30% 40% 50% (Percentage of survey respondents, n=146) Source: AberdeenGroup, May 2012 29
  • 30. Recommendations for Action  Continue to invest in diverse skills and capabilities on the strategic sourcing teams  Improve supplier assessment capabilities for strategic sourcing efforts  Develop the ability to enrich spend and supplier data for use in sourcing  Improve the usage of optimization tools and techniques  Increase the use automation in strategic sourcing tools particularly for complex spend  Implement sustainable/csr sourcing strategies across more categories 30
  • 31. CombineNet Advanced Sourcing Solution & Customer Results Copyright © 2012. CombineNet, Inc.
  • 32. Strategic Sourcing Not Constrained by Technology… “What We Have is Working Good Enough.” You can drive clear improvements where sourcing involves any of the following: – Business-critical spends/categories – Larger-sized RFPs – Non-price data that must be collected and analyzed – Supplier collaboration – Risk mitigation – Multiple decision stakeholders before awarding – Deeper analytics needed at faster speed – Aggregation of regional or lotted spends – Improved e-sourcing cycle times (speed, productivity) Copyright © 2012. CombineNet, Inc.
  • 33. CombineNet Company Overview The Company The Technology Customer Value Established in 2000. Best of Breed Solutions that Capture >2X spend under E- improve Strategic Sourcing. Sourcing management Global: Offices in 21 U.S. Patents. Pittsburgh, PA; London, UK; Manage supply risk with Hamburg, Germany. Software-as-a-Service (SaaS) Cost-Risk-Benefit analysis Partners for Latin delivery model for ease of America, Middle East, APAC adoption and scale Fast implementation and broad adoption for any type Customers: Global 2000 Easy integration into your of user spanning CPG, Food & environment to complement Bev, Retail, Manufacturing, existing applications Nearly 100% see full payback Transportation, and more after 1st sourcing event Copyright © 2012. CombineNet, Inc.
  • 34. CombineNet ASAP® for Advanced Sourcing Key Differentiators: SaaS-based Best-of-Breed product used Optimization Engine handles extensive by sourcing teams and their suppliers. data inputs; 21 patents. Speeds, simplifies, and centralizes the Scenario Builder enables rapid and creation and management of sourcing advanced ‘what-if’ analysis. events of any size, scale, or complexity. Expressive Bidding® supports an For any spend category (direct expressive, collaborative marketplace materials, indirect between buyers and suppliers. materials, transportation, services). Fast Implementation – 1 ½ day Complements and enhances existing training, quick-start wizards, template solutions and processes. uploads, event editing, etc. enable fast, smooth adoption, and immediate ROI. Copyright © 2012. CombineNet, Inc.
  • 35. Our Advanced Sourcing Product: ASAP® Create Bid Analyze & Award RFxpress Scenario BuilderSM (RFI, RFP, E- Auction) Expressive Bidding® Optimization Templates Expressive Feedback Reporting & Dashboards Event Quick-Start CombineNet ASAP Copyright © 2012. CombineNet, Inc.
  • 36. Typical CombineNet Customer 70% of Customers Use CombineNet ASAP alongside ERP/Suites Already have ERP/E-Sourcing Suite in place, but: – Multiple categories unaddressed by E-Sourcing – need a more flexible, robust technology solution to support. – Reached a savings plateau in mature categories – need more innovative E-Sourcing to drive savings. – Struggle with bid analytics – need ability to identify best sourcing decision based on “what if?” scenarios. Selected or are in process of implementing ERP/Suite, but: – Significant sourcing events are on the horizon – Need near-term value creation for supply chains Copyright © 2012. CombineNet, Inc.
  • 37. We Do this for Companies Just Like Yours A Wide Variety of Customers across All Industries Copyright © 2012. CombineNet, Inc.
  • 38. Where Do Our Customers Use Us Today? Across All Spend Categories: Direct, Indirect, Transportation, Packaging, Services - Spends Sourced (sampling) - Chemicals Capital Expenses Air Freight Bottles/Vials Advertising Commodities Construction Mat’s Drayage Cans Facility Services Fats & Oils Displays Ocean Cartons Labor Food Ingredients Fleet Vehicles LTL Corrugate Legal Services Raw Materials Office Supplies Parcel Flexible Films Meetings Resins Marketing/Media Truckload Printed Labels Printing Steel Telecom Rail/Intermodal Secondary Pkg Treasury/Finance From the Routine… - 51% had <100 items … To the Complex  20% had >1,000 items  20% had >50 suppliers  18% had >10,000 bids Based on FY2011 data Copyright © 2012. CombineNet, Inc.
  • 39. Large European Conglomerate $ Billion in Spend Managed Customer Profile: Annually >1,000 e-sourcing events 8 annually 7 Ariba user since 2007 6 Adopted CombineNet in January 5 2011 4 More than 2X Increase in 3 Corporate Spend Managed via E- 2 Sourcing in year 2 with 1 CombineNet ASAP 0 2010 2011 2012 $7.5 Billion E-Sourced in 2012 (projected) Ariba CombineNet Copyright © 2012. CombineNet, Inc.
  • 40. Case Study – Foodservice Operator Client Profile: First Event: CombineNet and Ariba User ROI: >100X Payback : Immediate CombineNet Details – Implementation: < 1 wk – Training: 1 day Sample Categories in First 6 – In the first 6 months: Months Using CombineNet  10 Events Opened Bags Bread  9 Awarded Eggs Buns Tortillas Bakery Needs Chicken Distribution Copyright © 2012. CombineNet, Inc.
  • 41. Case Study – Foodservice Operator (continued) Opportunity: 2 RFPs run in existing suite – Analyzed for 2 weeks & awarded manually Loaded same data into CombineNet – Analyzed multiple possible award options in a few hours (all in the product) Result: 2X in savings 2 weeks in time savings Copyright © 2012. CombineNet, Inc.
  • 42. Case Study – Major U.S. Retailer Client Profile: Customer using ERP procurement solution and CombineNet CombineNet Details Sample Categories in First 6 – Implementation: < 1 mo Months – Training: 1 day Ocean Freight Air Freight Recycled Trash Removal – Ran >8 events in CombineNet Corrugate Network in first 6 months Treasury Batteries Services Copyright © 2012. CombineNet, Inc.
  • 43. Changing the Way You Think about e-Sourcing Existing Tools Are Limiting Your Sourcing Strategy – Restrictions on size and scope require lotting, or breaking events into smaller pieces – Rigid bidding mechanisms deprive you of supplier Don’t let your innovation and value creation technology define – Price-focused analysis reduces options for real change your strategy! Copyright © 2012. CombineNet, Inc.
  • 44. Advanced Sourcing Helps Reduce Supply Risk Cost-Risk-Benefit Decision Making Identify and evaluate the risk factors of your supply decisions, and understand the cost impact of risk mitigation strategies Geographical Risk Mitigation Example Limit Japanese supply volume to 25% Limit S. Korea supply volume to 40% per plant At least 30% supply from China for each item There is a cost tradeoff for every decision; Optimization helps you quantify the cost-risk-benefit Copyright © 2012. CombineNet, Inc.
  • 45. Advanced Sourcing Drives Next-Generation E-Sourcing Value Conquer Complex Spend Categories Proven results provide confidence in conducting the largest and most complex e-sourcing events Improve Results in Mature Spend Categories Get beyond “savings plateaus” with advanced capabilities to find new supplier-driven savings and efficiencies Speed Up the e-Sourcing Process Quick on-boarding and faster time-to- award improves sourcing team productivity and Return on Procurement Copyright © 2012. CombineNet, Inc.
  • 46. CombineNet ASAP Provides a Clear Path to Execute Your Sourcing Strategy Execute Any Bidding Strategy with the Most Flexible and Scalable RFX platform – Unlimited event size and scope – Robust options for RFI, RFP, E-Auction event types – Expressive Bidding® for price and non-price bid elements, supplier information, innovation, and value-add Explore All of Your Options with Industry- Leading Bid Analysis – Fast, easy “What If?” scenario optimization – Combine RFI, RFP/Q, E-Auction responses, business preferences and constraints for a complete understanding of sourcing decisions – Uncover hidden savings opportunities and find the best sourcing solution faster Copyright © 2012. CombineNet, Inc.
  • 47. Fast Value Creation – Speed to ROI Nearly all customers get Rapid on-boarding and 100%+ payback after first implementation = online CombineNet ASAP event bidding in days Across ALL spends: 80% of our customers use Average 10% savings us to fill gaps in existing against spend size e-Sourcing/ERP suites (ranges of 5-60%) Copyright © 2012. CombineNet, Inc.
  • 48. Strategic Sourcing Not Constrained by Technology… “What We Have is Working Good Enough.” You can drive clear improvements where sourcing involves any of the following: – Business-critical spends/categories – Larger-sized RFPs – Non-price data that must be collected and analyzed – Supplier collaboration – Risk mitigation – Multiple decision stakeholders before awarding – Deeper analytics needed at faster speed – Aggregation of regional or lotted spends – Improved e-sourcing cycle times (speed, productivity) Copyright © 2012. CombineNet, Inc.
  • 49. What Next? Look for an email with: – Copy of the Aberdeen 2012 Sourcing Benchmark Report – Link to CombineNet ASAP® for Advanced Sourcing White Paper Contact Us to compare results for key spends: – info@combinenet.com – Jennifer.sikora@combinenet.com – www.combinenet.com Copyright © 2012. CombineNet, Inc.
  • 50. Reach Out!  Twitter: @ABG_SpendMngmt  LinkedIn: http://www.linkedin.com/in/climberakis  Aberdeen Group GSM Research Group  Aberdeen Group GSM Research Advisory Council (RAC)  Aberdeen Research Blog: blogs.aberdeen.com 50
  • 51. Thank You. Questions & Discussion Jennifer Sikora Constantine Limberakis Vice President of Marketing Senior Research Analyst CombineNet, Inc. AberdeenGroup www.combinenet.com www.aberdeen.com constantine.limberakis@aberdeen.com info@combinenet.com Twitter: @ABG_SpendMngmt Phone: +1 877-293-5480 Phone: +1.312.470.6071 Copyright © 2012. CombineNet, Inc.

Notes de l'éditeur

  1. Whether it is compliance, cost- or a supplier-focused initiative, sourcing provides an opportunity to identify true spend requirements for an organization. As a discipline that has become more sophisticated over the past decade, sourcing is also becoming more vital in aligning procurement organizations with the best suppliers and supply channels for delivering the highest possible savings opportunities. But what makes sourcing &quot;strategic&quot; is the ability to adapt and adjust sourcing approaches that reflect these needs in an ever changing and increasingly global and competitive marketplace.
  2. Based on the slide, it is clear that many have already adopted a strategic sourcing program - for instance we can that 37% have been using a formal process for more than 5 years, 29% 2/3 of the respondents having experience – many of them have also implemented eSourcing as part of this – for those in this category we see that a higher utilization of core sourcing technologies such as an ability to execute an event or run a reverse auction, with the former being a much more frequent occurrence.However we also see a small group less than 10% that do not have a formal process
  3. Furthermore Figure 2 reflects the benefits of strategic sourcing. With a majority of respondents (66%) having a strategic sourcing program in place for at least three years, 72% of these organizations noted the key benefit of strategic sourcing was increased level of cost savings, followed by better alignment of sourcing and business goals (54%) and better management of key spend categories (49%). These stated benefits demonstrate that strategic sourcing approaches can help organizations move away from tactical short-term cost cutting to value creation that considers wider organizational objectives. But as an ongoing process, strategic sourcing today also requires the flexibility for adjusting to a more uncertain economic future.
  4. So as we mentioned before we would visit the concept of formal sourcing - ……….Like many aspects of the procurement or sourcing world there are no set methodologies that everyone uses – case in point we can see an example that I used for the report that shows a seven step process – others use a six step process. One of the most noted ones was developed by AT Kearney was a seven step – above is a condensed example of this methodology. Moreover, as you can see the chart above shows a linear progression of typical steps in the “formal sourcing process”, however strategic sourcing is an institutional process that continuously improves and re-assesses the activities within the organization. For every new category of spend or supplier onboarding process this process is tweaked and re-tweeked. Regardless of how you specifically define each step, the whole process also invariably involves multiple disciplines – so when we say “strategic sourcing” – what do we really mean. For instance in looking at the process beyond technology or modules per se, we become well aware that sourcing is part of larger process that must include spend analysis, contract management supplier management, something Emily will talk about more in her presentation. If we look at the chart for instance – Step 1 – represents the need for spend analysis- this is a critical starting point to understanding what you are currently buying and how categories are defined.Step 2 – represents the importance of supplier management based on what data/intelligence you may already have and what market dynamics or trends exist within the universe of suppliers that will be evaluated – for instance are you dealing with a monopoly market, a competitive market or a commodity (unlimited number of competitors)?Steps 3 – 6 - Further demonstrates the reliance on eSourcing tools for generating eRFx or Reverse auctions – but it is in Step 5 that is also showing the usage of advanced techniques. For instance the different approaches used to evaluate cost and non-cost factors in making decisions comes here like using bid optimization - when evaluating bids here is where Total cost can be broken down into Material Cost, Transportation Cost, Labor Cost, etc… instance Step 6 is also where flexibility in the sourcing process allows suppliers to adjust to pricing, etc.Step 7 – Finally with Step 7 this takes us to the execution of sourcing through a contract and downstream from there.
  5. - Procurement professionals are increasingly relying on strategic sourcing to help avoid supply disruptions
  6. Perhaps driven by concerns over diminished returns from repeated sourcing events on the same set of categories or lack of skills to execute on internal strategies in more complex categories, sourcing organizations continue to be pressured to find new approaches for reducing cost and identifying savings. External pressures from global markets are also increasingly adding a new dimension that force organizations to reassess their sourcing efforts. An example of this is how organizations today must reconsider global risk in Europe due to the Euro crisis, or the changing landscapes for low-cost competitiveness shifting from places like China to newer markets such as Vietnam or Indonesia. Given these pressures, Figure 3 shows organizations indicate that the corporate mandate to reduce cost / increase savings is the leading pressure for 69% of survey respondents. As many organizations reach a level of maturity and saturation point in achieving their goals with mature categories (i.e. low hanging fruit) they may lack knowledge for expanding into more complex ones due to insufficient category knowledge or the inability to improve sourcing performance required in this dynamic global environment. Furthermore, organizations today are becoming more aware of sourcing sustainability (i.e. ethical, environmental, social issues) as a critical aspect for sourcing and a theme of the advanced sourcing concept.
  7. Mitigating these pressures requires an ability to improve supplier insights and improve sourcing performance. Based on this survey, however, it is clear that barriers to strategic sourcing revolve around the lack of advanced techniques such as supplier optimization and the inability to integrate sourcing initiatives with spend analytics and supplier management. For example, Figure 4 shows only 33% of respondents indicated a capability around supplier risk assessments, 29% indicated optimizing ideal (preferred) suppliers and 27% indicated the use of use of proactive data analytics for future sourcing projects. In recognizing the importance of better understanding the impact critical suppliers have on organizational spend and for improving techniques in these areas, 50% of organizations indicate they plan to implement proactive analytics for future sourcing projects, 50% plan to optimize ideal suppliers, and 43% plan to implement supplier risk assessments
  8. Clear pattern where centralization follows a key pattern for Best-in-Class – and follows a center-led approach with a centralized souricng tram that managing all strategic sourcing projects.
  9. As part of the functional criteria for getting the job done in sourcing, it is important that organizations align themselves with that of the wider organization. It is clear that Best-in-Class organizations demonstrate leadership here in their ability to coordinate both with the lines of business and areas like finance. Again when we look at the least collaboration it is no surprise that the Sustainability Officer is still an emerging area for most, where only 1/3 of Best-in-Class and 27% of All Others are collaborating here.
  10. Best-in-Class shows the largest capability advantages with a majority of these being related to organizational factors such as the cross-functional coordination with various groups and the use of commodity councils.Yet two areas that also show gaps is in the ability to collect spend data from multiple sources and the ability to enrich spend and supplier data – a critical element in the initial stages of the formal sourcing process we shared earlier.
  11. Advanced Sourcing Approaches - Total Cost of Ownership - a strategic sourcing approach that offers award scenarios by incorporating all elements of cost related to different suppliers, including cost of poor quality, cost of inspection and long lead times.Matrix pricing - used when price depends on a factor other than quantity (i.e. delivery date or geographic locations). Tiered pricing - used when price depends on purchasing volumeOptimization - used as part of advanced analytical tools to simultaneously negotiate and evaluate complex bid structures against a wide range of interdependent sourcing objectives, variables, constraints and potential scenarios Total Landed Cost – Tries to track all the costs (both costs of good sold, as well as supply chain and logistics costs) from the moment of purchase the raw material until it ships to the customer including all steps in the middle (and including inventory in different stages)______________________________________The importance of these areas is helping organizations better align their needs – an example of this is in the low-cost sourcing to places again like China where prices are rising and may not be a low-cost source. Through the use of Total Cost of Ownership and Total Landed Costs, organizations are better prepared to understand their true costs
  12. It appears that on average the Best-in-Class are demonstrating an edge in the percentage of spend going through an eSourcing tool for all categories in both direct and indirect spend areas. The largest maturity differentials for direct, indirect materials and services spend is also revealing when looking at specific categories. For example, IT hardware is a mainstay commodity area and typically a low hanging fruit where many organizations have already seen the benefits of using e-sourcing. Based on the survey results, 50% of the Best-in-Class indicated using e-sourcing for IT hardware compared to 33% of Industry Average, but only 7% of Laggards. What is also revealing is the use of e-sourcing for services spend, where Best-in-Class show 3-times the use of automation in comparison to Laggards. A services spend category that showed the largest difference between the maturity classes was travel, where 42% of the Best-in-Class are using an e-sourcing tool compared to 26% of Industry Average and only 4% of Laggards.
  13. Looking at what feature sets are automated within an e-sourcing platform also provides insights into where the Best-in-Class are demonstrating advantages with their use of e-sourcing technology. The Figure shows six key features of e-sourcing tools today. In examining the figure it is clear the Best-in-Class are demonstrating advantages in their use of areas that can be considered more advanced. The Best-in-Class are 2 times more likely to be using sourcing optimization and bid analysis as a part of their strategic sourcing processes. A highly-automated aspect to strategic sourcing, sourcing optimization and bid analysis provide a potentially powerful combination of artificial intelligence to understand “what if” scenarios. By providing suppliers with a wider opportunity and freedom to express their bidding and preferences in a more sophisticated response for quotes, Best-in-Class sourcing organizations are better able to establish an enhanced ability to analyze disparate bids from their suppliers.
  14. Finally – the last slide gives and idea of where organizations stand in their current perceptions in using eSourcing platforms. This shows Ease of Use at the highest level – but differences begin to show –for instance Best-in-Class are more likely to be concerned about the ease of integration with back end systems and up stream areas, and the ability to access complementary sourcing services available from the solution provider.