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Study
Warns That Tactical Cost Benefits of E-Sourcing Could Be Short Lived
Aberdeen Group, IT market analysis and positioning services firm,
released an extensive report on the strategic sourcing market entitled
"Making E-sourcing Strategic: From Tactical Technology to Core
Business Strategy."
The report is based on a study of end user experiences in the U.S.
and Europe and evaluations of 40 e-sourcing solution providers.
Aberdeen Group projects that the market for sourcing management
technologies will grow from $820 million in 2001 to approximately
$3.1 billion by 2005, representing a compound annual growth rate
of 39.8%.
Enterprises and solutions have matured dramatically since Aberdeen
examined the e-sourcing market in 2001. Early adopters have moved
beyond the "land of pilots" to make e-sourcing technologies
a core component of their overall strategic sourcing initiatives.
However, most enterprises continue to focus on near-term tactical,
cost savings. Aberdeen warns that this myopic focus on cost reductions
could limit the potential impact of e-sourcing.
"Facing an unstable economic environment, enterprises have
been allured by e-sourcing ability to rapidly deliver significant
cost savings and return on investment (ROI)," says Tim Minahan,
vice president of supply chain management research. "This siren
song of quick return on investment (ROI) has drive demand for tactical
e-sourcing capabilities, including RFx and reverse auctions. However,
to sustain savings and drive continuous improvements, enterprises
will need to adopt functionality that supports sourcing collaboration,
knowledge and project management, and advanced analysis to drive
common and repeatable sourcing processes across the enterprise."
The report examines the selection criteria, deployment strategies,
experiences, and future plans of e-sourcing users across multiple
industry sectors in the U.S. and EMEA markets. Key benefits recognized
by early adopters include:
· Negotiate a 14.3% reduction in goods and services costs,
on average
· Cut sourcing cycles in half
· Reduce sourcing administration costs by nearly 60%
· Shorten time-to-market cycles by 10% to 15%
Users also reported that e-sourcing enhanced their ability to standardize
sourcing practices, negotiate with foreign suppliers, extend strategic
sourcing to a broader range of spending, enhance product quality,
strengthen supplier relationships, enhance sourcing expertise and
skills, improve supply market knowledge, and elevate the perception
of the procurement function within the enterprise.
Despite such benefits, Aberdeen research uncovered flaws with early
e-sourcing strategies. Specifically, while e-sourcing technologies
have proven effective at enabling enterprises to negotiate significant
cost savings, 60% of e-sourcing users indicate that they have not
been able to fully recognize these savings on the bottom line.
Additionally, the percentage of savings achieved through online
negotiations will inevitably decrease over time. As a result, enterprises
will be forced to turn to more advanced sourcing processes that
can improve visibility into spending, enhance market intelligence,
standardize processes, and capture innovation in the supply base.
The report provides strategies for solution evaluation and deployment
and examines future trends in e-sourcing solution functionality
and structure. The report includes Aberdeen's market growth projections
by geography and company size. The report also includes evaluations
and profiles of 40 providers of e-sourcing technologies and services.
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