July 04, 2023 | Procurement Software
For most retail businesses, sourcing has always been a cost-savings function that operates behind the scenes and supports other functions.
Today, however, the perspective on sourcing has changed rather dramatically, especially as retailers’ margins have shrunk considerably over the past few years.
Many retailers continue to struggle amid an uncertain economic landscape and now look to build an agile, resilient and sustainable business. In this endeavor, they look to transform sourcing into a strategic business function.
Growing competition and changing buying patterns have made it vital for retailers to design innovative products and categories. Today, consumers are not afraid to switch brands and are increasingly demanding products that are environment-friendly and sustainable.
All these requirements have necessitated the use of technology in a function that has largely worked with manual, time-consuming processes.
And, done right, sourcing can enhance savings and improve the bottom line.
It’s no surprise that technology can automate most of the routine, mundane tasks that sourcing teams currently perform manually. Checking inventory levels, tracking purchase orders, following up with suppliers – all these tasks can be handled efficiently by machines.
Automating these tasks not only frees up human resources, but it also saves valuable time otherwise spent in managing transactions, preparing negotiations and other tasks.
More importantly, technology can empower sourcing professionals to make informed decisions. By providing access to analytical data and insights, it enables sourcing to go beyond its traditional responsibilities and evolve into a truly dynamic function that can add more value.
To begin with, sourcing technology simplifies the all-important task of supplier selection. It evaluates suppliers based on their track record and past performances. It also helps negotiate best-value agreements with electronic tendering and auctions. Further, it eases supplier management by maintaining supplier scorecards and summary reports.
Technology provides complete visibility of spend throughout the purchasing cycle. It identifies uncontrolled spend and makes a structured plan to bring more spend under management. Detailed spend analysis helps a business identify savings opportunities, reduce maverick buying and lower procurement costs. Automated invoice matching and rules-based payment approvals help curb unauthorized purchases.
An advanced sourcing platform can also leverage analytics to cleanse, classify and analyze spend data by supplier and category, thereby increasing item-level visibility. It can also send out automated alerts on increased spend in a particular category.
Process integration is a key advantage of technology. Source-to-pay software integrates strategy and planning, sourcing, contracting and purchasing to combine disjointed processes. It brings together the entire process and workflow into a single, unified platform.
Such integration enhances collaboration between various stakeholders and enables real-time information sharing. It allows retailers to work closely with vendors and build a collaborative ecosystem. As a result, retailers and vendors can work together to build a resilient supply network.
Additionally, with the help of sourcing dashboards, retailers can get a 360-degree view of sourcing activities and events and evaluate performance vis-à-vis their sourcing strategy.
Another area where sourcing technology can play a key role is risk management and contingency planning. In an evolving new normal that is prone to disruption, technology allows retailers to stress-test their supply network and anticipate potential risks.
Technology can also help to conduct what-if scenario planning and prepare for worst-case scenarios. As a result, retailers can stay prepared for unforeseen disruptions, material shortages and sudden surges in demand.
Changing consumer preferences and ever-increasing expectations have revolutionized the retail landscape. Instead of buying in stores and shopping malls, consumers have turned to online marketplaces and other digital channels. While the trend of online shopping isn’t by any means new, the pandemic and other unforeseen events in recent times have brought about near-permanent changes in consumer behavior.
Along with adjusting to consumer demand, retailers have had to contend with many other challenges of late. From stores shutting down during the pandemic lockdowns, supply chain disruptions, cost and inflationary pressures and inventory management challenges – the industry has witnessed pressure from all sides.
All this has accelerated the retail industry’s digital transformation. And this transformation will impact all processes including sourcing, supplier selection, procurement, inventory and warehouse management and transportation.