Sourcing Innovation.com, a new blog from former sourcing optimization technology developer turned consultant Michael Lamoureux, has initiated a noble project: tap the top minds in the business for their view of the future of strategic sourcing and supporting sourcing technologies. I was honored to get the call.

In my more than 15 years as researching and advising on the supply management discipline, I have seen strategic sourcing advance more in the past five years than in the previous two decades. This rapid progress has been fueled largely by the introduction of new, Web-based sourcing management software (dare I say “e-sourcing”?) and decision-support technologies. Globalization, outsourcing, and tightening economic and supply market dynamics have also prompted enterprises to adjust and improve their strategic sourcing methods. Even since the introduction of e-sourcing tools in the mid-90s, we’ve seen sourcing and negotiation methods shift from a focus on price-based market transparency to a focus on achieving the best value solution that meets overall business objectives.

As sourcing methods (and e-sourcing technologies) continue to mature, we will see advances in the following areas: guided sourcing, hybrid sourcing, supply chain sourcing, frontline sourcing. Below I examine the first two of these sourcing approaches in more detail. I will delve into the latter two predictions in tomorrow’s post.

Guided sourcing

The most immediate advances in sourcing approaches and technologies will come in the area of advanced analytics and reporting. To some extent future is now.

Optimization-based sourcing technologies enable enterprises to simultaneously negotiate and evaluate complex bid structures against a wide range of interdependent sourcing objectives and constraints, such as set-asides for diversity goals or risk management strategies. Such evaluations were impossible using traditional and Excel-based analyses.

Likewise, role-based dashboards and portals are give supply management professionals — from commodity managers to Chief Procurement Officers – a command-and-control view into their most critical supply performance information (e.g., savings versus goal, contract compliance, performance issues, etc.) and tasks (e.g., supplier qualificiations, open sourcing projects, etc.).

Advances in the decision support area will come both in enhanced usability and applicability. Early optimization tools were complex to use  and focused on a narrow group of complex spend categories, particularly transportation and packaging. Such limitations made optimization impractical and too costly to use for most enterprises.Solution providers will improve usability, incorporating pull-down menus, wizards, and other utilities that allow sourcing managers to create and test multiple scenarios. Future optimization tools will also incorporate category-specific intelligence and cost models to improve usability further and to make optimization applicable to a wider range of spend categories.

Reporting dashboards will incorporate third-party intelligence and tools, such as supplier risk information, commodity pricing benchmarks, or category costing tips. Dashboards will also leverage open Web-portal standards to extend supply information to other enterprise stakeholders, such as the CFO or COO.

Hybrid sourcing

Since 2001, I have been predicting the emergence of the “hybrid sourcing model” that blends sourcing technologies with third-party supply market and sourcing intelligence.

In this scenario, the e-sourcing technology platform functions much like a cable box, providing the utility to access and organize information and resources required for effective sourcing. This platform connects to a network of subscription-based channels that provide programming in the form of supply market intelligence, commodity costing models, supplier information, and category-specific sourcing templates that are optimized for a specific e-sourcing tool (the cable box). The latter point is critical because, instead of using offline researching, these channels put supply content in context of your sourcing process and infrastructure.

In the perfect scenario, these third-party content channels would help enterprises capitalize on supply market shifts and minimize risks. For example, a certain channel might predict a tightening of supply or a future price increase for Commodity-X. Your company’s contract for this commodity may not come due until next year, but the channel sends an alert recommending renegotiating now. The alert is connected to full programming on Commodity-X, including supply market factors, cost models, and sourcing templates that can be loaded into your cable box. You shore up supply and locks in pricing in exchange for long-term volume commitments, avoiding the shortages and rising supply costs that are sure to face your competitors. (Hey, this strategy worked for Southwest Airlines.)

With the sourcing solution market winnowed down to less than a handful of truly viable providers and Global 2000 standardizing their e-sourcing infrastructure, this prediction is fast becoming a reality. Look for a cottage industry of sourcing consultants and commodity experts deliver sourcing intelligence directly into the major e-sourcing platforms.

Check back tomorrow for an examination of the emerging supply chain sourcing and frontline sourcing approaches.

A previous Supply Excellence post reported that studies from both ISM and Purchasing Magazine found that women are still paid one-third less than men in similar supply management roles. However, both studies reported an increase in the number of women in top procurement and supply management roles. A new study from the International Association for Contract and Commercial Management (IACCM) suggests one reason why women are snagging top posts: women are better negotiators and relationship managers than men.

I have asked IACCM President and CEO Tim Cummins to share the highlights of this study below. Tim, who will provide a keynote speech on Contracting Excellence at the upcoming Empower 2006 Conference, reveals the findings of the latest IACCM skills, recruitment, and development study below:

IACCM recently conducted a survey on negotiation style and approach. The inputs were cross-industry and came from more than 30 countries. This brief article describes what the results reveal about gender-based differences.

• While women are well represented in contract management overall, they appear to be significantly under-represented in the field of negotiation. Only 30% of the participants were female (this rose to 40% in US and some Northern European countries; it sank to 20% or less in most other parts of Europe and Asia-Pacific). The percentage varied little within age groups (except under 29, where - in a relatively small sample group - the females were in a slight majority); and it also made little difference by job function (except Legal, where the percentage of women dropped to 15%).
• Stereotypical views that men are more likely to be risk-takers (a view historically supported by female self-assessments) and that women are more inclined to ‘win-win’ negotiation are not supported by the results of this survey .
• Women are significantly more inclined to seek a relationship rather than being fixated on ‘the deal’. They also show appreciably higher time sensitivity than male participants.
• Women are less concerned about having ‘one leader’ in a negotiation and prefer a top-down approach to the way the negotiation is conducted.

Since this was a self-assessment and did not seek comments, we can only surmise the factors that lie behind these results.

• If female negotiators are indeed in a minority, why might this be? Is it through choice, or because of constraints? Does the fact that women are in a majority in the under 29 age group indicate either a) there is a change underway or b) that in older groups, the demands of family or other ‘value shifts’ make the typical negotiator job less attractive?
• The survey showed men and women pretty much equal in their approach to risk. Around 30% in each case are open to ‘high risk’ and approximately the same percentage showed themselves ‘risk averse’. When it comes to ‘win-win’, 83% of women and 80% of men select this as their preferred style. Of course, we don’t know whether there is any gender-based variation in what we consider ‘risky’ to be, or how we define ‘win-win’ results and behaviors. For example, one recent commentator implied that women are more open to compromise - is this true and does it suggest that mutual compromises represent win-win?
• 39% of men focus on the contract, against just 23% of women. Women show themselves significantly more inclined towards the relationship. This is interesting, since it is commonly acknowledged that relationship negotiation takes more time than a contract-focus, yet 76% of females perceive themselves as highly time-sensitive, versus only 63% of men.
• Women are less likely to be emotional in a negotiation than their male counterparts. Although the difference is not dramatic, it is appreciable and certainly runs counter to the common view that typical males would have!
• Women are more prepared to be democratic in the negotiation process. They are less concerned about having one leader or authority figure. This is one of the few findings that probably aligns with wider social research.
• In areas of personal style, agreement form and communication there was no significant male / female difference.

Overall, the results showed a high level of consistency in the attitudes and style of male and female negotiators. There was little to imply that one or other might gain better results, or that they might be better suited for particular types of negotiation. Perhaps the only slight indicator was that men - because of their tendency to focus on the contract and their preference for ‘authority’ - may be more comfortable with confrontational negotiations - for example, those associated with commodity supply. On the same basis, a higher proportion of women would perhaps excel at solution or relationship agreements. Are we seeing such similarities because there really is little difference in male / female style as negotiators; or is it because the only women who are allowed to become negotiators are those that fit a common (male dominated) value model?

IACCM welcome your views and comments, including any ideas for further research or discussion on this topic.

Thanks, Tim. Now if we can only turn some of those peak negotiating skills to securing pay-scale parity for women. I encourage Supply Excellence readers to join and participate in IACCM studies and events. If you would like to contribute to the study (all participants will receive the on-going reports) simply go to http://www.iaccm.com/surveys/talent/

Comments to my recent posts on “Why e-Sourcing is Good for Suppliers” continue to roll in.  One particular remark raises a touchstone issue. Kevin Brooks, a former big-wig at a procurement solution provider cum bigger-wig at a performance management startup asks:

Internet-based requisition-to-pay automation (e-procurement) has been quietly delivering measurable value to enterprises in the form of reduced material and operating costs, improved compliance, and increased total spend under management. With pressures to increase spend under management and compliance, a growing number of enterprises are now looking to expand e-procurement deployments globally. Those considering such global expansion will face both opportunities and challenges both with internal deployment and adoption and global supplier enablement.

I’m glad to introduce Supply Excellence’s latest guest blogger, Suzanne Miglucci, to share experienced insight and recommendations for mastering a global e-procurement deployment. As VP of Marketing and Strategic Alliances at SciQuest, a leading provider of On Demand e-procurement, supplier management, and materials management solutions, Suzanne has first hand experience on what works in e-procurement and has actively assisted customers in organizing and deployment for global success. Suzanne shares her recommendations below:

It’s about time that most organizations view the procurement process as a strategic contributor to organizational value and overall success. Taking it a step further, your organization can also reap the benefits of the next big trend in procurement– the globalization of e-procurement.

How can your organization benefit on a tactical level by globalizing your e-procurement program?

• Integration of disparate ERPs: While mergers and acquisitions can establish immediate global reach, it might also create procurement challenges in the form of disparate purchasing systems. By implementing a global spend management solution, you can enable global visibility into spending, regardless of whether disparate ERPs may be deployed.
• Tactical growth: Establishing global reach and visibility with your purchasing program allows you to become more attuned to tactical growth – the growth of new products and markets and the optimization of processes and suppliers
• Supplier consolidation: Consolidating your supplier base creates more opportunities to identify low cost and reliable suppliers on a geographic basis. You may be able to take advantage of significant volume discounts and service-level agreements, allowing you to quickly gain a foothold in emerging markets.
• Lower operational costs: Labor and delivery expenses are often lower as well as material and manufacturing costs when procured according to geographic region.

How can your organization benefit by consolidating spend analysis and procurement data on a global level?
By globalizing spending, you have created a single point of purchase on a global basis, allowing you to increase ROIs from each supplier in your network. Globalization provides commonality in the way in which you roll-up data so it is most meaningful. Global reporting creates actionable data which can empower you to make better business decisions. Procurement starts to drive the revenue-generating ship. Pockets of inefficiency become visible where they were not previously.

What challenges can you expect by globalizing your e-procurement program?
As global organizations often support operating divisions in multiple countries, purchasing is typically performed on a geographic basis. This can potentially create a silo effect where disconnected pockets of purchasing take place across the world. In addition, bandwidth is required to develop strategies and procedures to institute and manage a global e-procurement program. Establishing purchasing offices internationally can also present ramp-up costs and support issues.

• How can you negate these challenges to ensure your globalization efforts are a success?
  Your organization should establish a core set of best practices when considering whether to globalize your e-procurement system.
• Localization: Can users, suppliers and vendors work in multiple currencies? Does your environment allow for multiple languages?
• Localized supplier network: As there will always be instances in which users must rely on local providers for certain good or services, providing a mix of global and local suppliers empowers regional pockets of users.
• Global managed service and support: A quality service and support program is more than simply managing a box and maintaining system uptime. Your provider should establish themselves as a trusted working partner of your organization. Routine upgrades, seamless iterations, and training should be integral parts of a quality managed services program.
• Other challenges and risks: Does your system allow for easy end-user buy-in and adoption of the new system and associated processes. The ideal e-procurement environment leverages technology innovations and external information and service support to address other issues such as time zone differences, intellectual property protection, and currency fluctuation.