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Retailers: What’s in the way of your sourcing success?

Guest Blog by Steve Whiteman

Coming off a less than spectacular holiday shopping season, the retail industry is once again feeling the squeeze.  According to USA Today, of the 29 retailers that recently reported earnings guidance for the current quarter, 25 of them were negative. Adding to the uncertainty is a recent report from Standard & Poor, which predicted that rising healthcare costs and low retirement savings will hurt discretionary spending in the coming year.

The worst news, though, comes from Deloitte, which reported that the number of retailers going bankrupt has increased over the past three years – rising 6 percent last year and up 18 percent since 2010.

For retailers, trimming costs is more important than ever. And when it comes to improving margins and profitability, procurement is always a good place to start.

In the last decade, full-service e-sourcing has emerged as an essential tool for maximizing the value of a retailer’s supply chain. E-sourcing gives procurements teams a fast and easy way to secure more favorable terms from suppliers, eliminate inefficient processes, and glean data-based intelligence for smarter sourcing strategies. By establishing e-sourcing as a key part of the procurement process, organizations can fight against rising prices and uncertain consumer spending, and more importantly – transform the supply chain into an engine for value and growth.

Unfortunately, for many businesses – not just those in retail – procurement transformations can be daunting – filled with internal obstacles that hinder success.

In many cases, procurement leaders face resistance from buyers – either because they’re concerned that reverse auctions will damage long-standing and carefully nurtured supplier relationships, or they’re skeptical that technology and outside experts can replace traditional procurement skills or experience.

In other cases, buyers don’t believe that strategic sourcing can have a notable impact on greater business objectives – or that e-sourcing can live up to its claims of double-digit savings without negatively impacting quality or service levels.

Additionally, many procurement teams lack the staff and resources required to successfully execute a sourcing transformation.

Fortunately, there are several strategies that sourcing leaders can employ to overcome these hurdles and get their organization fully committed to supply chain excellence.

Get the C-Suite Involved

Enlisting the help of the CEO or CFO can be a powerful and effective way to ensure that your procurement team is onboard with e-sourcing. The c-suite sets the tone for the entire company – and it’s no different with procurement.

A CEO or CFO can ensure that buyers accept e-sourcing as a critical component of the procurement process by confirming and reaffirming – both publicly and privately – its importance to the overall goal of maximizing supply chain value, and continually articulating the company’s commitment to financial success.

By positively showcasing confidence in e-sourcing, the c-suite can help buyers overcome their doubts of the technology.

Empower Buyers

While the c-suite can set the overall tone, e-sourcing success ultimately depends on buyers being invested and dedicated to the process. Procurement managers can achieve this by clearly articulating what’s at stake for them – and the business itself.  

The best way to get buyers to buy-in is to celebrate sourcing success with employee recognition programs that reward buyers that hit particular goals – such as running the most sourcing events, or sourcing the highest amount of spend. By publicly recognizing the most successful savers, procurement managers can instill a positive and competitive team environment.

Additionally, managers can include e-sourcing metrics in buyers’ KPIs and annual goals. This ensures that buyers’ sourcing success will translate to their professional growth.

Provide the Tools to Succeed

Of course, once buyers are invested in supply chain transformation, procurement leaders will want to put them in the best position to succeed.

E-sourcing can enable retail buyers to make more informed procurement decisions by providing greater insight into a company’s spend – including the category volume, suppliers used, historical data, market trends, and more. With this insight, buyers can run more sourcing events, with more effective techniques – including combining vendors or sourcing multiple categories in a single event.

And with the help of outside sourcing experts, procurement managers and buyers can better understand when the best opportunities are to source specific categories, and ensure that events are run quickly and with the most effective strategy to yield the best possible results.

Driving Growth and Profitability

The key to a successful sourcing transformation in positivity and empowerment.  The company culture shift requires complete organizational participation, from the top down. It starts with the c-suite – but after that, procurement managers need to ensure that buyers are empowered and are rewarded and recognized for their success.

By committing to maximizing the value of their supply chain, retailers can win a major competitive edge that drives revenue and brings more customers in the door.

Steve Whiteman is Chairman and CEO at Intesource. Intesource’s latest report — “Overcoming Internal Roadblocks to Sourcing Transformation” – is available now for download.

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