Navigating Volatility with Dynamic Market Sourcing

Procurement leaders have accepted volatility as the new norm for the present and foreseeable future. In fact, buzzwords such as ‘agility’, ‘risk mitigation’, and ‘cost avoidance’ have become deeply embedded in modern-day procurement circles. To manage such disruptions, innovation in procurement processes is centered around creating fluid sourcing strategies. Businesses are rapidly shifting from traditional cycle-based sourcing to dynamic market sourcing by integrating the right tools into their sourcing operations.?

Dynamic market sourcing incorporates a resourceful strategy that helps companies source goods at competitive market prices. This article condenses the role of dynamic market sourcing in overcoming traditional sourcing challenges and delivering value amid volatile supply chain markets.?

Why Traditional Sourcing Models Need Replacement

Limitations of legacy systems

For most procurement teams, a basic ERP system or MS Excel is the only option for sourcing goods. These manual processes bring along massive administrative burdens for the sharing, collecting, and comparing of hundreds of bidders, quotations, and purchase orders (POs). Unfortunately, such practices limit the ability of procurement teams to optimise costs and lower sourcing turnaround times.

Mismanaged spot buys

With their limited means of purchasing alongside frequent market disruptions, procurement teams frequently rely on spot bidding with their supplier base. Spot bidding is purely cost-driven, often involving offline negotiations with non-approved suppliers outside the formal sourcing cycle. Such practices result in mismanaged spend and high inefficiency, leaving businesses open to supply chain risks.

Cost volatility

Amid inflationary pressures and dramatic supply chain disruptions, procurement teams are now reconsidering cost savings as their top priority. Fluctuating commodity prices have put CFOs in a tough position, having to adjust budgets regularly and sometimes spend 2-3 times their projected spend for sourcing fewer goods. Even buyers and category managers are forced to manage sourcing spend effectively in order to meet targets.?

To overcome such hurdles, many businesses have adopted new-age software to automate repetitive sourcing events and address any gaps.

Responding with Dynamic Market Sourcing?

Industry leaders have been responding to this volatility by shifting from traditional to dynamic market sourcing practices. Implementing dynamic market sourcing refreshes as needed means that CFOs are also able to update their reporting from annual reports based on old rates to more current rates at each refresh. Annual sourcing events remain in place to align business requirements, while off-cycle events are used to fill gaps and confirm market rates.?

The building blocks of dynamic market sourcing and its enabling technologies include a flexible workflow engine that can automate processes for divergent needs. To improve human decision-making, the system is paired with an optimiser that can weigh both price and non-price factors when presenting alternative bidding scenarios. Online bots autonomously and continually scour the marketplace for changing conditions and help automate the process of deciding which suppliers should be invited to bid.

Dynamic market sourcing’s supporting technology can automate as much as 90% of procurement workloads and digitise 100% of sourcing negotiations. Implementing an intelligent eSourcing solution can help businesses switch from cycle-based to market-based sourcing, which will free up their time, elevate their quality of work, and improve their bottom line.?

Here are some benefits of implementing dynamic market sourcing:

Greater compliance and transparency

Having access to market intelligence, either via benchmarking or through an RFP, can help businesses easily identify unwarranted price increases from suppliers and reduce budget leakage outside the procurement team’s control.

Faster sourcing cycle

With sourcing needs changing rapidly, tools such as Procol’s procurement solutions can turn months into weeks or even days. Our intuitive procurement software is designed to quickly create, share, and evaluate RFPs and RFQs with suppliers and buyers.

Uncover cost-saving opportunities

Buyers can use intelligent solutions to discover new opportunities and innovations for driving competitive bidding, even within volatile markets.

Supplier evaluation

By moving to a more regular, dynamic sourcing environment, businesses can test and onboard new suppliers to check if they align with their procurement needs.

Conclusion

The recent market volatility has been a wake-up call for many, alerting them to the fact that strategic sourcing has for too long endured poor systems for managing bid events. A dynamic market sourcing strategy can drive significant advantages because it not only allows best-in-class teams to improve their speed of execution, it also unlocks time for them to focus on strategic priorities that get overlooked when putting out fires surrounding essential operational activities.?

With a modern, user-friendly design, Procol’s procurement solutions offer easy adoption and enhanced productivity, while supporting large-scale deployments for some of the country’s largest enterprises.

For more insights related to procurement, follow Procol or visit https://www.procol.io/