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Striving for Procurement Excellence? Here’s What You Need to Do

The role of procurement in organizations is no longer a matter of debate. Sourcing and procurement have been gaining increasingly strategic relevance in companies and has been the object of constant attention as it is directly related to the level of effectiveness of the organization and closely connected to the company’s cost structure. There is a new recognition in companies of the positive impact that procurement excellence can have on important performance indicators, like costs and spend patterns. Now, top players across industries are contemplating ways to attain sourcing and procurement excellence in order to gain a sustainable cost advantage for business. Furthermore, companies can analyze their procurement operation and think strategically using reliable data which is a foundational building block of procurement excellence.

Execute transformational changes

Leading organizations leverage internal and external data while undertaking transformational changes in procurement. This helps them shift focus to strategic buying vs. tactical procurement. Combining these elements give companies unprecedented visibility over their procurement functions and better leverage its role in increasing profitability. Companies that have harmonized data around their spending tend to attain sourcing and procurement excellence. For instance, while purchasing raw materials, manufacturers must gain an understanding of the change in spending on a year-on-year basis in order to proactively pinpoint and cater to any significant fluctuations.

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Top 5 Procurement Challenges Impacting Businesses in 2018

Today, no one can say that procurement professionals and sourcing teams have it easy. They face daunting challenges and struggle to stay abreast of all the regulatory changes happening around the globe. Procurement, for many, is an undervalued operation that impacts every facet of your business.  While there are many procurement challenges, each organization will face its own unique set of challenges. In this article, we’ll talk about some of the common procurement challenges that companies will face while sourcing goods and services this year.


Effective risk management

risk management2Procurement challenges are an inherent part and parcel of every business process. Each business faces them at some point but managing them effectively is something that every procurement team struggles to do. With the focus shifting towards business expansion, it is no longer good enough to engage with tier 1 suppliers. Implementing an effective risk management strategy at the very start of the procurement process, therefore, becomes a necessity for companies looking to expand their boundaries. But before any company thinks about engaging with tier 2 or tier 3 suppliers, implementing risk mitigation strategies like analyzing the risk of each supplier, comprehensively understanding their supply chain, and putting backup plans in place in case things go wrong become essential.   

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supply management

Transportation Services Firm Leverages SpendEdge’s Procurement Best Practices to Establish New Functional Goals

Sourcing and Procurement Challenges for Transportation Services Providers

One of the biggest sourcing and procurement challenges for transportation services providers is the rising fuel and trucking rates. Firms in the transportation services sector are also concerned that ocean rates are going up and ships are slow steaming as a result of fuel prices. Therefore, it is essential for firms in this sector to work closely with their suppliers to ensure that they use best possible carriers.

Engagement Overview

A leading transportation services provider to identify and establish new functional goals. Additionally, they wanted to benchmark the best practices and enhance the productivity and efficiency of their business operations. As a result, they approached SpendEdge to devise a comprehensive approach to compare and benchmark their business processes and metrics to the procurement best practices.

To help the client identify, evaluate, and benchmark the procurement best practices, SpendEdge carried out a detailed quantitative analysis by assessing research-based data, industry surveys, and interviews. The procurement best practices benchmarking study also offered detailed evidence-based insights on the overall industry’s performance, which helped the transportation services provider to set new functional goals.request proposal

About the Client

An American transportation services multinational company.

Business Challenge

The client wanted to benchmark the procurement best practices to formulate winning strategies, tactics, metrics, and plans.

How did SpendEdge Help the Client?

Step 1: Detailed assessment of the company’s process performance and procurement gaps

A comprehensive understanding of the existing business processes and gaps helped in deciding what and why factors need benchmarking.

Step 2: Prioritized metric to benchmark

This step involved identification and examination of collected data to reveal the extent to which the current performance can be improved for each segment.

Key questions answered in this procurement best practices engagement include

Benefits of the Engagement

With the help of SpendEdge’s procurement best practices, the transportation services provider analyzed the organization’s past performance in relation to the procurement best practices, competitors’ strategies, and proposed benchmarking changes. This enabled them to establish new functional goals.

Why incorporate procurement best practices?

A procurement best practices study is essential for organizations who are determined to enhance their operational efficiency and performance across different aspects of the industry. The study also enables firms to acquire knowledge on hard facts, including operations rates, performance gaps, and industry risks.

Our Findings

Today, it is pivotal for any organization to understand the acceptable industry standards and determine where their company stands. As a result, it becomes crucial for companies to leverage the use of procurement best practices as it helps them stay in sync with the current market scenario.

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Procurement Best Practices for the IT Consulting Services Supply Market

The global IT consulting services market has reached maturity, but the trend of outsourcing to low-cost countries continues.

Every time you research online to see how much the market for IT consulting services will grow, you’ll see a common pattern, which is the market is growing, but slowly.” Now you wonder why this market is witnessing slow growth despite the rising adoption of IT services. Well, fret not, we at SpendEdge don’t believe in giving ambiguous answers. Our procurement market intelligence reports offer businesses and stakeholders the scope to understand the supply market and the key factors affecting the sourcing and procurement of IT consulting services. According to our experts, the demand for IT consulting services has matured, and the market is fragmented due to the presence of independent consultants and small firms who provide niche services such as data analytics and IT advisory. (Source: Global IT Consulting Services Category – Procurement Market Intelligence Report)

SpendEdge Insights TrialIn addition, the recent rise in M&As across industries, such as chemical and oil and gas, will boost the demand for IT consulting services to handle activities pertaining to accounting, resource planning, budgeting, and data warehousing. With the preference for IoT rising ever so steadily among end-users, the spend momentum will increase and buyers will not be looking at conventional large service providers to avail effective IT consulting services. The Americas and Europe are expected to be the front-runners in terms of demand but regions like APAC are also anticipated to witness an increase in the demand for such services due to the extensive outsourcing of such services. Now that we’ve established a base for you to understand the growth potential of the IT consulting services market, let’s look at some of the procurement best practices that will help you save costs in your sourcing and procurement activities.

Top three procurement best practices for IT consulting services

Strategy 1: Streamlining execution

Due to the critical nature of their operations, buyers of such services have to focus on streamlining execution and monitoring services in a structured manner. One of the procurement best practices for the buyers is to establish a strategic plan in collaboration with service providers. This would help both parties to create a blueprint of the solution and allow category managers to identify cost-saving opportunities.

Strategy 2: Performance monitoring and benchmarking

To increase supplier accountability and identify potential performance bottlenecks, the buyers of IT consulting services should design strong KPIs for the constant monitoring and evaluation of service providers’ performance. Since the data gathered from establishing effective KPIs would help buyers to gain a better bargaining power during the contract renegotiation phase, it is one of the key procurement best practices to be followed if you are looking to procure IT consulting services at effective rates.

Strategy 3: Emphasize on strategic contract management activities

One of the best procurement best practices to source IT consulting services at effective rates is to define phases and processes that service providers should follow and clarify responsibilities that need to be fulfilled to gain maximum value from their engagements. The critical nature of the category makes it essential for the procurement department to participate in planning actively.

SpendEdge’s procurement report offers strategic insights on the supply market for IT consulting services and helps procurement professionals to gain information on the sustainability and procurement best practices, pricing models, supply market, and key sourcing and procurement trends affecting the global IT consulting services market.

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Sourcing and Procurement Overview: Global Air Filters Market

The players in the global air filters market seem to have hit the jackpot with the market growth showing a steady rise in the past few years. The automobile industry is one of the major contributors to the growth of the air filters industry. Thanks to the ever-increasing increasing rate of automobile demand and production, the demand, and profits for air filters is also expected to skyrocket in the years to come. Furthermore, the increasing rate of replacement of air filters in industrial facilities is also one of the major contributors to the effective sourcing and procurement of air filters by companies. (Source: Global Air Filters Procurement Report). Here is a look at the global air filters market and related sourcing and procurement opportunities and challenges in a nutshell:Get Free Sample_SE

Spend potential and key markets

As mentioned earlier, the rise in the demand for automobiles has consequently contributed to a major portion of the demand for air filters. But interestingly, this does not mean that this industry will show an equal sign of growth in all parts of the world. In countries like South America, there is an increased demand for sourcing and procurement of air filters from end-user industries such as oil and gas and automobile. However, in the North American and Europe, the demand is expected to shrink owing to factors such as low aftermarket sales and a shift in end-user industries to low-cost countries of South America and APAC.

In regions such as South America and MEA, global suppliers operate through distribution channels to cater to the demand of end-user industries. Global suppliers are likely to dominate the regional supply market during the forecast period because of their long-term strategic partnerships with buyers, especially from the oil and gas industry.

SpendEdge Insights TrialCost analysis: Supplier costing

There are a lot of components that go into the making of a final product. In this case, steel and plastics are the key raw materials that are being used. The bad news is that the rising steel and plastic prices are likely to impact the prices of air filters during the forecast period. Moreover, growing R&D investments for continuous product development to provide high-quality products will also act as a major contributor to the rising prices.

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Supplier selection and procurement best practices

Sourcing and procurement are critical operations for any company as they impact the overall efficiency of the business. When it comes to filters, buyers should collaborate with suppliers for efficient demand planning by reducing the ad hoc purchases. It should also be cross-checked by the buyers if the suppliers provide periodic predictive maintenance that helps in analyzing the product’s health. It helps in the reduction of losses caused due to sudden failure of filters. Furthermore, frequent maintenance aids to enhance the product lifecycle of air filters is highly essential in the case of sourcing and procurement.

Top five suppliers of air filters

  • DENSO Corporation
  • MAHLE GmbH
  • Donaldson Company, Inc.
  • Parker Hannifin Corp.

SpendEdge’s procurement report offers strategic insights on the supply market for air filters and helps category managers to gain information on the procurement trends, pricing models, supply market, and key sourcing procurement challenges affecting the global air filter market.

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Sourcing and Procurement Challenges in the Oil and Gas Industry

The oil and gas industry is recognized as the engine for development in most economies. However, the companies in this industry are known to operate in dynamic and complex environments, where they constantly face challenges, especially in terms of supply and demand. But in the current market scenario, it is advisable for companies in this sector to evaluate the supply chain, sourcing and procurement techniques, and costs. Furthermore, as the industry faces the likelihood of a long-term low-price environment, procurement teams need to look beyond short-term tactics and take a more proactive and strategic stance within their organizations—for example, working further upstream in project design and collaborating with the engineering and design teams to reduce complexity before it is locked into long-term procurement cost. Although the technology is helping oil and gas companies to find and extract more oil, there is a need to seriously consider more effective sourcing and procurement systems that provide additional real value. But the catch here is that the process is not easy as it sounds. Here are some of theSE_Demo2 key sourcing and procurement challenges in the oil and gas industry:

Locally sourced supplies

In many cases, there is a requirement for the oil and gas sector to award various contracts to local companies (i.e. tool and dye operations, pipefitters etc.). That requirement can be the result of government regulations, or due to location (oil and gas companies often work in remote locations and will deal with service companies located near their operations). But these contracts can often prove to be lucrative and are “sought after by local companies.” That competition can result in circumstances where there is a higher risk of bribery, fraud, corruption, and other abuses.

Single-supplier sourcing and procurement

There is a general tendency for oil and gas companies to purse sourcing and procurement contracts with sole suppliers. Sometimes, companies offer specialties and expertise that make sole-supplier sourcing and procurement a reality. However, this could lead to undisclosed conflicts of interest and kickback schemes. Additionally, in case the processes have not been conducted properly, financial losses can be incurred that can compromise the quality of goods and services provided.

Third-party companies

Companies in the oil and gas sector need to be aware when third-party companies specializing in sourcing and procurement, engineering, and construction management work on their behalf. The sourcing and procurement activities carried out by these firms are susceptible to improper practices, and companies may find themselves liable for the acts of third parties. Oil and gas companies that operate in remote locations may end up working with third-party sourcing and procurement companies. And in those remote locations, the difficulty in monitoring these companies is higher because they are often not connected to corporate systems and electronic controls.  Geographic isolation could further cause challenges and limit internal audit monitoring, thus paving the way for fraud, bribery, and corruption.

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Supply Market Intelligence Helps a Leading Communications Equipment Supplier Overhaul its Service Delivery Model

Overview of the global communications equipment industry

The global telecommunications equipment industry produces technologies and services that are used to facilitate people’s communication. Major products of the telecommunications equipment industry include cell phones, wireless, chipsets, and landline infrastructure equipment, digital-subscriber-line (DSL) and cable modems, and networking devices, such as routers and switches.

Factors that are expected to fuel the growth of the communications equipment industry are the rising demand for IP-based communication and multimedia solutions and the need for increasingly high bandwidth by residential and business customers. Additionally, the rising demand for technologically superior products has been a silver lining for the telecommunication industry. This, in turn, has boosted the demand for communications equipment manufacturers.

However, our recent analysis of the latest telecommunication industry trends shows that the telecommunications equipment suppliers are facing challenges in terms of:

  • Competitive landscape: The telecommunications equipment industry solely depends on purchases from businesses, cable companies, data communications providers, telephone companies, and TV and radio broadcasters. Moreover, the profitability of individual companies is linked to technical innovation and the ability to secure high-volume contracts from large customers.
  • Technology investment: Technology investment is crucial to the telecommunications equipment industry’s ability to keep pace with the competitors. High-speed broadband is increasingly being viewed as a fundamental human right, with calls for the industry to increase investment in networks to deliver improvements in fiber-optic connectivity and 5G coverage.

Many such factors are compelling firms in the telecommunication industry space to leverage the use of supply market intelligence. request free proposalSupply market intelligence helps companies to manage changes, acquisitions, customer wins and losses, divestitures, operational changes, and other factors that have a substantial impact on a supplier’s ability to deliver. These solutions also help companies build a low cost, reliable, nimble supply chain, which consequently helps in delivering better quality products at a lower cost.

The Business Challenge and Journey

Client background: The client, a leading communications equipment supplier with business units spread across the globe was providing unified communications software, networks, devices, and services based on its open communication approach, but changes in the market were prompting them to reexamine their business model.

Client issue: Although the traditional telephony product business was declining, the market for services such as cloud and managed services in unified collaboration was growing. The pressure was mounting from new players, who were more experienced with IP- and cloud-based technology. To succeed in this market, the company needed to adapt to changing market demands.

The supply market intelligence experts at SpendEdge carried out a comprehensive research methodology. The research approach included primary and secondary research coupled with qualitative and quantitative data collection procedures to help the communications equipment supplier build a business model that would take the company from being a hardware solution vendor to a cloud and managed services provider.

Client journey: The communications equipment supplier made use of an agile approach to design, prototype, and roll out initiatives, including the design of a modular service offering catalog, service delivery process management. They also made use of managed services automation, field service performance improvement, offshoring and outsourcing of field service capacity, and change and non-conformance cost management to succeed in the market.

Fundamental questions answered in this supply market intelligence engagement

The Results

With the help of SpendEdge’s supply market intelligence solution, the communications equipment supplier was able to master the new market environment and achieve immediate savings. The client also overhauled its service delivery model and captured significant direct savings across all areas of the business from service and delivery, supply chain, and IT to sales and marketing and R&D.

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Spend Management Assists A Prominent Transportation Services Provider to Develop A Strategic Procurement Strategy

Overview of the Transportation Services Industry

The global transportation services industry includes several sub-sectors including subways, municipal buses, goods transport systems, and other similar modes of transport. The industry encompasses all those businesses that move people or goods, by land, sea, or air, from one point to another. The transportation services industry is capital-intensive, and the demand is primarily driven by macroeconomic trends in global imports and exports. request free proposalAdditionally, the intensity of competition fluctuates depending on the specific industry; the road transport sector for instance, usually experiences the highest level of rivalry, while railways, as natural monopolies, suffer less from direct competition. As a result, leading players operating in the transportation services space are looking at expanding their business units to establish their presence in the market.

However, our analysis of the logistics industry shows that the leading transportation services providers are facing challenges in terms of:

  • Economic factors: Transportation projects across the globe may have an adverse impact on the community’s economic development objectives including business activity, employment, property values, productivity, and investments. The chief aim of such projects revolves around improving the overall accessibility while reducing transportation costs. Therefore, it becomes necessary for firms in the transportation services space to consider both the positive and negative impacts of economic factors.
  • Civic impacts: These include the effects of a transportation project on communities beyond specific factors that unpleasantly affect the users of transportation services. It is also known as ‘social impacts’ and includes variations in environments, noise, views, and land use mix and community cohesion. Additionally, community impacts serve as a significant decision factor when transportation services providers are weighing both the distributional and adverse effects of proposed projects.

Several such factors are compelling transportation services providers to leverage the use of robust spend management solutions. Spend management solutions help firms efficiently manage their organizational spend and identify critical savings opportunities to reduce maverick spend. These solutions also help companies effectively monitor their spend and gain better visibility into the spend performance.

The Business Challenge and Journey

Client background: A leading transportation services provider with business units spread across the globe wanted to streamline their business practices and analyze their current, past, and forecasted expenditures to allow visibility of data, based on commodities.

Client issue: The client wanted their entire process of spend management including data extraction, classification, and analysis to be reinforced by automation, thereby, making it a sustainable process. The client also wanted to implement a robust spend management solution to reduce their overall material and service costs.

The spend management experts at SpendEdge carried out extensive research comprising interviews and discussions with prominent stakeholders in the transportation services sector to help the client develop a strategic procurement strategy. The experts also compiled information across a wide array of reliable sources such as trade shows, company presentations, industry forums.

Client journey: During the course of this spend management engagement, the transportation services provider was able to identify the opportunities to improve operational performance and buying power, reduce costs, and provide better management and oversight of suppliers while strengthening relationships with the internal and external stakeholders.

Key questions answered in this spend management engagement

TS2The Results

SpendEdge’s spend management solution offered the transportation services provider gain actionable insights on the organization’s overall spend data across the logistics Industry. The client also improved their spend visibility and increased their compliance with procurement policies. This helped them reduce their overall spend by ~74%.

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Category Management Helps A Leading Specialty Retail Client to Perform A Systematic Analysis of Sales Performance, Profitability, And Customer Metrics

Overview of the Specialty Retail Industry

The global specialty retail industry is highly fragmented and comprises of stores that focus on catering merchandise including pharmacies, grocery stores, and boot stores. Over the past decade, the specialty retail industry is witnessing a significant growth owing to the rapidly growing middle class, strong economy, and the availability of trained workforce.

Prominent organizations in the specialty retail space are focusing on innovative ways to delight their customers and strengthen loyalty as customers are craving for innovations, authenticity, and convenience in the products offered to them. Also, the radical shift toward the customer-centric environment is compelling establishments to look for transformative possibilities to change their retail outlook and offer personalization through extensive product knowledge.

However, our analysis of the latest retail industry trends shows that several factors may influence the growth of the market although the specialty retail market will witness exponential growth due to the macroeconomic factors including rising disposable income, GDP, and consumer spending. A few factors include:

  • Increasing consumer demands: Today, busy lifestyles are forcing customers to look for more convenient options in their shopping activity. Moreover, the shopping preferences of the customers are changing, and are looking for authenticity in the product and service offerings. Therefore, to efficiently cater to the growing demands of the customers, organizations in the specialty industry space are spending highly on R&D activities.
  • Growing E-commerce: In recent years, the specialty retail space has witnessed the entry of leading-edge e-commerce giants. Moreover, consumers today are demanding more and are looking for convenient ways in their shopping activities. Therefore, it becomes essential for brick-and-mortar retailers to devise e-commerce platforms to stay on par with the growing technologies.

Many such factors are compelling firms in the specialty retail industry space to leverage the use of category management solutions. request free proposalCategory management solutions help firms enhance their competitive position leading to increased market share, improved positioning, and sustainable customer loyalty. These solutions also help firms improve the alignment of their marketing programs.

The Business Challenge and Journey

Client background: The client who approached SpendEdge is a pioneer in the organized retail industry with one of the largest chain of supermarkets across the globe. 

Client issue: The client had experienced difficulty in achieving growth and addressing margin problems. Like many supermarkets, it carried a wide range of product categories with different rates of inventory turns, different freshness issues, and different buying relationships with suppliers. The management team believed a new approach was required but were unsure as to how to proceed. SpendEdge was hired with three goals in mind: to demonstrate opportunities to improve sales and margins, to change the basis for negotiations with suppliers and, to transfer such capabilities to the internal organization.

SpendEdge’s category management experts followed a comprehensive research methodology and carried out discussions with prominent stakeholders in the specialty retail space to improve sales and margins. The experts also compiled information from a wide array of proprietary sources such as paid industry databases, company presentations, and industry forums.

Client journey: During the course of this category management engagement, the client was able to conduct a  full value-chain analysis to understand the full breakdown of costs for a designated category and identify effective pricing strategies. Additionally, the client established internal centers of excellence with formal methodologies, tools, and training for knowledge transfer to the other teams in the organization.

Key questions answered in this category management engagement

The Results

With the help of SpendEdge’s category management solution, the specialty retail industry client identified significant savings potential—$10 million in the first three months as a result of full value chain analysis with $18 million identified from improved category management. Additionally, one important high-margin category benefited from a 54% reduction in inventory, which allowed the client to switch to a pull inventory approach.

To know more about our category management solutions

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