With Deloitte CPO surveys showing that cost reduction leapt as their main priority from 69% in 2014 to 78% in 2018, procurement teams are turning to new strategic sourcing platforms to achieve impressive enterprise savings. This is according to the online resource, Supply Chain Brain. The new digital solutions deployed by procurement teams are fundamentally changing the way they operate, streamlining and expanding strategic sourcing, providing accurate spend analytics, and offering cutting-edge new solutions, such as reverse auctions and dynamic negotiations.
Achieving cost reduction in the absence of a simple, streamlined and shareable overview of supplier relationships, obligations, and contracts was almost impossible. However, the new solutions have changed that, offering real-time visibility across all supplier activities, and yielding a 360% view to sourcing leaders and contract managers of the supplier relationship. The tools grant full transparency to colleagues in legal teams as well as stakeholders, suppliers, and vendors. They achieve substantial cost reductions because they enable procurement pros to identify more effective cost-cutting opportunities and close communication loops faster.
New ways of purchasing are being offered by new reverse auction and dynamic negotiation platforms. Both activities were difficult, but a survey in 2017 found that businesses using these platforms were running reverse auctions effectively because the technology prioritises high quality for good price instead of merely rewarding the lowest bidder. They not only maximise cost reductions but also improve supply relationship management, because pricing and negotiations are based on historical relationships and newly-identified opportunities for increasing value. Estimates suggest that reverse auction platforms can achieve cost reductions in purchasing of 10-20%, with one global retailer accomplishing almost $400,000 in savings in a single 30-minute commodity auction.
The new sourcing platforms are improving collaboration across all business stakeholders to achieve handsome cost reductions. A new study of procurement chiefs found that most expect a 40% rise in annual savings thanks to automated procurement solutions.