Sourcing Solutions Deliver Edge-of-the-Enterprise Business Benefits

Market-leading purchasing organizations indicate sourcing applications that offer spend visibility enable purchasing professionals to reduce total spending by an average of 4 to 8 percent.

The Yankee Group interviewed one market-leading discrete manufacturer whose material costs skyrocketed when it moved from a make-to-stock to a make-to-order model. In response to unacceptable inventory expenses, the company launched a manual spend-visibility project.

The project had two objectives: First, the company wanted to gather and rationalize spend information across three geographic locations. Second, the firm intended to map its manual purchasing process to identify workflow cost-saving opportunities. With the help of expensive external consultants, the manufacturer successfully mapped its procurement process and rationalized spending for its top commodity category.

The manufacturer had a 12-step manual procurement process that used output from three versions of the same ERP system on material requirements, and inventory systems on current inventory levels. It had to manually rationalize requisition data, which it then needed to cleanse because different ERP instances produced inconsistent item and vendor files (a lamp was called a 'lamp' in one ERP instance, and a 'light' in another).

Next, the company had to extract historical information from its accounts payable system about the price it paid for a given item in previous orders. Then, it had to call to determine the supplier's availability and generate a purchase order, which the company then printed and faxed.