Sunday, April 15, 2001

Strategic e-Sourcing Could Save Businesses $1.7 Trillion

In a report released today, Aberdeen Group, a leading IT market analysis and positioning services firm, states that Internet-based sourcing (e-Sourcing) could save businesses more than $1.7 trillion on a global basis. In addition, Aberdeen finds that applying Internet-based technologies to strategic sourcing activities can shorten process cycles, lower administration costs, and speed time-to-market for new products.

"Strategic sourcing provides the single largest opportunity for companies to reduce costs and design optimal supply chain structures," says Tim Minahan, report editor and director of supply chain management research. "With the unstable economic environment forcing companies to control costs, Aberdeen foresees significant demand for e-Sourcing technologies and services. We anticipate that the e-Sourcing market will top $3.3 billion in revenues by 2004."

Strategic e-Sourcing describes the process of utilizing Web-based technologies to support the identification, evaluation, negotiation, and configuration of products, suppliers, and services into a supply chain network that can efficiently respond to changing market demands. It is during the sourcing cycle that an organization defines the overall cost and structure of its products and its supply network. Aberdeen's research on procurement executives from multiple industry segments finds that deploying a strategic e-Sourcing framework can deliver the following benefits:

- Identify and negotiate with a broad range of qualified suppliers;
- Reduce process costs for sourcing engagements;
- Shorten sourcing cycles by 25% to 30%;
- Reduce time-to-market cycles by 10% to 15%;
- Negotiate 5% to 20% unit price reductions, on average;
- Extend strategic sourcing to a wider range of products and services; and Enhance collaboration and knowledge sharing.

The report, titled “Strategic e-Sourcing: A Framework for Negotiating Competitive Advantage,” quantifies the benefits and challenges of strategic sourcing; defines a framework for strategic e-Sourcing; and sizes the market and opportunity for e-Sourcing technologies and services. The report also includes e-Sourcing case studies and profiles 36 providers of e-Sourcing technologies and services.