Big data in action in strategic sourcing

15 August 2013
Companies are getting more spend under management by gathering increasing amounts of data from suppliers, going beyond price to make award decisions that more closely reflect identified business objectives and even re-analysing decisions using data from past events. Sourcing events can sometimes involve very large data sets – analogous to the ‘big data’ buzz we hear about regularly - particularly for strategic categories and events involving spend aggregation. This is what causes many basic sourcing tools to fail, forcing teams to resort back to using spreadsheets, which is a problematic approach. Given the number of items sourced, the number of bid elements that must be collected from suppliers and the number of suppliers invited to submit their bids – along with the suppliers’ conditional, alternative and package offers you may wish to collect – one event can be a stand-alone big data scenario. Multiply that by an increasing number of spend categories, as companies get more spend under management, and the numbers become more impressive. So what are some advanced sourcing data-wrangling examples? These stories from the field speak volumes.
  • A quick service restaurant buyer considered a change in pre-packaged condiments. Using existing data from previous sourcing events that hadn’t had the benefit of bid optimisation analysis, the buyer was able to leverage advanced sourcing to quickly examine a switch to the alternative packets and found significant cost savings without having to start an entirely new event. Buyers can run re-analysis scenarios for other reasons, such as being faced with a specific supplier who can no longer meet the demand, asking “what if?” re-allocation questions to meet the capacity.
  • A retailer with more than 800 stores sought to consolidate regionally-sourced spend for its shops’ common area maintenance services (landscaping, lot sweeping, snow removal, and so on). The retailer used e-sourcing to support a single aggregated sourcing event for these spends, which resulted in a 10 per cent saving, a three-week reduction in sourcing time and a 10-fold reduction in analytics time.
  • One of the world’s largest CPG companies sought to manage in-store product displays spends, which had been traditionally sourced through the marketing department. The customer used e-sourcing to reflect the marketing preferences in the event and gave visibility into the costs of different scenario outcomes. The results included a 45 per cent saving worth $72 million (£46 million) and kept stakeholders satisfied.
  • One global multinational improved its spend under management with e-sourcing, going from $1 billion to more than $4 billion using its technology – a management, efficiency and productivity victory.
These companies are seeing how e-sourcing can help bolster procurement transformation efforts, dramatically reducing time spent on bid data aggregation and analysis; improving strategic analysis capabilities for the sourcing team; and determining an optimal supplier award solution that balances demand, stakeholder requirements and market conditions. ☛ Tobias Hannon is managing director of European operations at CombineNet
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