Support Learning and Insight

It’s more important than ever to understand the challenges facing financial executives. Support the Financial Education & Research Foundation today.

Strategy

The True Cost of Manual Sourcing


by Andrew Durlak

Manual processes are not only holding back innovation within the sourcing function, but also costing businesses in ways they don’t even realize.

©z_wei/ISTOCK/THINKSTOCK

As the old MasterCard ad campaign reminds us, some things in life are priceless. For many, the comfort of the status quo falls firmly under that category — and a large portion of sourcing teams still employ manual practices to execute their sourcing processes for that very reason. However, these tried-and-true methods do come at a cost. With the emergence of digital technologies, there is now a better — faster, easier, and more strategic — way to do sourcing. 

If this scenario speaks to you, you’re not alone: A recent Harvard Business Review report in partnership with Scout RFP found that non-customer-facing operating activities, like procurement and sourcing, lag behind their customer-facing counterparts in the use of advanced digital technologies. The report goes on to point out that, “The lack of technological integration and automation in this area is particularly problematic given the increasing pressure to run the business efficiently, make strategically aligned decisions around the globe, provide valuable insights, and improve collaboration across the board.”

This widespread lack of technological integration and automation within the sourcing function is a problem, but it also presents a unique opportunity to incite greater sourcing visibility and collaboration across all business functions. This, in turn, would bring procurement to the forefront of business strategy alongside finance. Some businesses, as the HBR report points out, could even see up to 400 percent ROI if they use strategic sourcing to its fullest potential.

If you’re not already convinced that it’s time to take advantage of this massive opportunity, consider the cost factor: These manual processes are not only holding back innovation within the sourcing function, but also costing businesses in ways they don’t even realize.

Lost hours

From tracking down vendor information in lengthy email chains to reviewing contracts, manual sourcing practices take a toll on employee efficiency. By enlisting a strategic sourcing platform to automate many of those time consuming tasks, businesses empower procurement experts to apply their sourcing knowledge to more strategic activities, rather than spending their valuable time on admin tasks. An Aberdeen report drives this point home, noting that best-in-class procurement organizations run three times more eSourcing events annually than others.

Missed savings

Manual processes also mean missed savings. By speeding up tasks like vendor selection through apples-to-apples comparisons via an eSourcing platform, businesses can make more impactful decisions, faster. That means entering vendor relationships that provide the best quality for the lowest price — without months of manual comparisons. An eSourcing platform that provides spend insight and savings visibility allows procurement and finance to work hand-in-hand to track which relationships and projects are the most impactful for their business, so they can identify successful strategies and replicate them for heightened bottom-line impact.

Forward-looking decisions

To truly execute strategic sourcing, procurement teams must be able to make forward-looking decisions with the entire business in mind. Sourcing technology that offers a centralized sourcing project pipeline can help procurement work alongside finance to prioritize projects for better business impact. Similarly, new technology opens up the opportunity for seamless cross-functional collaboration, allowing procurement to usher in an overall business sourcing strategy that drives true ROI.

The true cost of manual sourcing is bigger than most businesses think. Fortunately, new eSourcing technology has paved the way for quicker, more strategic decision-making. As the HBR report points out, “Strategic sourcing — including activities such as alignment of plans to business objectives; supplier research, assessment, and development; contract negotiation; and supplier relationship management, including risk management — today plays a wide-ranging and highly influential role in the enterprise’s effort to address business challenges, build strategic partnerships, and maximize opportunities.” After all, best-in-class sourcing that is faster, easier, more strategic, and, well, just plain better? Priceless.

Andrew Durlak is the Co-Founder and VP of Operations at Scout RFP.