For many procurement teams, keeping informed of the best suppliers to meet their organization’s needs globally, across hundreds of different supply categories, is a superhuman task. Yet discovering and recommending the optimal suppliers for any given contract is one of the key promises made to stakeholders. Does procurement deliver on this promise? If the supply market isn’t fully evaluated during a strategic sourcing project, the answer may be no.
Why include more suppliers?
With each additional supplier involved in a strategic sourcing exercise, there’s an increased likelihood of finding a supplier with a better solution; a supplier that creates greater competitive tension among the other suppliers; or a supplier that is simply more affordable or of better quality. It’s the same logic as buying one raffle ticket and expecting to win compared to buying a dozen raffle tickets.
What is the ideal number of suppliers to involve?
The optimal number of suppliers to involve before you start seeing diminishing returns varies by supply category. Some restricted categories, such as mains water supply, may have only one or two suppliers, while more commoditized markets like stationery may have hundreds.
Many procurement teams consider a shortlist of three to five suppliers for any given sourcing exercise as sufficient. However, statistically, that is rarely enough to guarantee the full potential value from the market.
If you take Market Dojo’s strategic sourcing data, for each additional supplier involved in a sourcing exercise, an extra 1% saving can be achieved until you reach around 12 suppliers.
Why aren’t more suppliers often involved?
If artificial intelligence could evaluate every supplier within minutes, against the specific requirements for any strategic sourcing project, in order to deliver the best value, there’s no doubt it would be used.
However, until that exists, procurement often faces limitations due to manual strategic sourcing processes. The laborious task involved with finding potential suppliers takes a lot of time, and cajoling suppliers through an offline tender process adds to that time—not to mention the manual work needed to evaluate and consolidate proposals offline. It all results in procurement teams scrutinizing only a small subset of the market in order to work within their resource constraints.
How to succeed in gaining new suppliers
The unique partnership between Market Dojo and TealBook is the best solution at procurement’s disposal for streamlining the strategic sourcing process, enabling a greater number of suppliers to be evaluated at a much richer level.
By using Market Dojo’s on-demand eSourcing solution, dozens more suppliers can be involved in the full knowledge that the manual re-work which often comes with email and spreadsheet-based tendering will be eliminated. Leveraging TealBook’s leading supplier discovery solution within the process means the optimal number of suppliers are interrogated in the applicable market at the click of a few buttons.
Market Dojo has witnessed procurement teams involve more than 600 suppliers for their strategic sourcing exercise through digitized processes, clearly demonstrating to stakeholders and executives the true value that procurement can bring to the table. If you’d like to learn more on how to turbo-charge your strategic sourcing, contact us today by visiting MarketDojo.com or on LinkedIn.
