Strategic Sourcing

Strategic sourcing most often relates to suppliers that are of strategic importance to the success of a business. Suppliers that deliver non-product related products and services, are oftentimes out of sourcing scope. And yet, giving the long-tail suppliers sourcing attention creates significant opportunities to get spend really under management.

Direct versus Indirect Sourcing

The challenges that are related to the strategic souring of products that are used to produce the goods that a company sells, differ significantly from sourcing of products that are considered overhead (i.e. non-product related).

A company that produces computers selects suppliers of microprocessors in a very careful manner, contrary to sourcing a supplier that services coffee machines at the office. The success of a company is to a large degree dependent on microprocessors and not coffee machines.

Is a supplier of microprocessors able to give any guarantees that his microprocessors comply with certain functional and technical requirements? Is he able to deliver the right type of microprocessors in a definable number at the right moment? And does he operate in accordance to standards related to labor and the environment.

The financial consequences and risks associated with direct sourcing are typically considerable larger than those of indirect sourcing. In many cases, a company shows a degree of dependency towards the supplier of goods that serve a company’s core business, and switching to a supplier that delivers equivalents products is costly or difficult.

Strategic sourcing and purchasing of non-critical items (in Kraljic terms) are typically associated with much lower risks, and as such, it is of importance to rationalize the supplier base of these goods and to standardize contracts and transactions as much as possible in scope of cost savings.

Automation of Indirect Sourcing

The difference between direct and indirect sourcing is reflected in the manner in which sourcing is automated. Despite the fact that indirect spend (sourcing and purchasing) is not critical to a business, it takes up about 20% to 50% of total spend and thereby offers great potential for cost savings.

This is mainly accomplished, on one hand, by rationalizing the supplier base, and on the other hand, by having the business aligned with a selection of preferred suppliers with whom contracts are negotiated. This results in much more spend under management and straight-through processing of invoices, which in turn, results in better cash flow management.

ICreative offers Basware solutions that focus predominantly on indirect sourcing and purchasing. However, with regards to invoice processing and spend management, our solutions pertain to both direct and indirect sourcing and purchasing.

White Paper | Lean Finance

The financial function of companies has been undergoing a digital transformation for well over a decade. This transformation offers ample opportunities for finance to gain much more control on business spend and to reduce the complexity of the purchase-to-pay process. In other words: the digital transformation leverages a lean approach in many ways.

Note that the white paper is currently only available in the Dutch language.

e-RFx, e-Auction, Contractmanagement

Automation of strategic sourcing commences with an inventory of requirements, prerequisites and potential suppliers that can meet these criteria.

When the need has been defined, suppliers are invited to participate in an eRFx and deliver the requested information. This helps to make a further selection among suppliers or to make a final selection of one or more preferred suppliers that offer the best proposition.

In addition and depending on the sourcing goals, various types of eAuctions can be applied, including Dutch, Forward and Reverse, to invite a shortlist of suppliers to offer their best proposition.

Once suppliers are chosen, contracts can be negotiated which sets the scope for purchasing to bring all spend under management.

We love to hear from you!

As Basware and Kofax partner, ICreative offers e-invoicing and purchase-to-pay solutions to large companies, institutions and governments. Our solutions provide more controle on business spend and less complexity of the purchase-to-pay process.

We’d like to keep you posted regarding purchase-to-pay and e-invoicing matters. If you’d like to exchange thoughts with us on how to improve and automate these processes, feel free to contact us.