Four “What Ifs” for 2013: New Horizons in E-Sourcing

Brett Cornell makes the case for using advanced e-sourcing solutions to make the sourcing of packaging materials more efficient.

By Brett Cornell

When it comes to the sourcing of packaging materials, it may be that procurement teams aren’t asking “What if” as strategically as they could. But if you’re using today’s more advanced e-sourcing solutions -- which allow the buyer to capitalize on innovation from suppliers by collecting as much data as possible and running multiple, and rapid, scenarios for stakeholder analysis – “What if” scenarios are easy to analyze. Here are some examples:

What if you could source similar packaging simultaneously across multiple brands’ platforms?

In a major consumer packaged goods company, your decisions about the various packaging spends -- across high, mid-level and lower end brands -- can be more collaborative today, with brand managers from all brands coordinating with the purchasing team.

For example, a supplier may have an innovative hot stamping alternative that fits your lower end brand spend. Before the buy, all stakeholders can decide how such a change and more appealing look will impact the higher end brand. By collecting more data and alternatives through the sourcing process, you can make more informed decisions about brand equity, cost savings, and the implications for the future of the brands.

What if your geographic strategy should be a hybrid of supplier-locale types?

Many companies have declared a local, regional or global “only” strategy, having educated themselves on the strengths of their suppliers while working to avoid the costs of shipping empty packaging. What if your best solution was actually a hybrid of these?

The roadblock to evaluating such a hybrid approach is the immense challenge of data crunching which is often too onerous to tackle in Excel. Testing combinations of geographic strategies is easier with e-sourcing optimization, even, for example, at a packaging complexity level that includes more than 500 different bottle types and sizes. If your company has committed to a local, regional or global “only” buying, you should at least test the strategy to be sure it’s better than any hybrid alternatives – and again, you’ll need scenario optimization for that.

What if you could receive bids that propose innovations to your packaging RFP?

With advanced sourcing, you can allow suppliers to suggest alternative item proposals, such as different materials, production methods, or the like. Scenario optimization will then make it easy to run analysis on the innovations that suppliers propose in trying to grow their business while addressing your needs.

What if you could evaluate sustainability initiatives through the e-sourcing process?

One example is that some recycled packaging may result in a dimming of the “bright white” signature to a brand. With every business change there are trade-offs. The key is having the tools to effectively weigh every trade-off, and you can get quite granular.

So, how complex can your sourcing scenarios become, while still being easy to analyze? What if your analysis could look something like the following?

  • 50% preference to the supplier who can provide both secondary and tertiary packaging

  • Favor incumbents by 10%

  • 20% preference to suppliers who can run both low, medium and high end packaging jobs

  • 10% preference to suppliers with transparency on their carbon footprint

  • 20% preference to those who can boast a specific level of insurance

  • And the awarding might be split among a mix of 35 suppliers

You may want to adjust those preferences and business rules to re-analyze different scenarios, especially as you respond to the “What-ifs” proposed by various stakeholders, and even compare scanarios side-by-side.

This is a powerful, collaborative analysis benefit to using advanced e-sourcing solutions to ensure everyone is confident in the final decision. The industry is beginning to harness this kind of complex procurement power. What if your business could benefit from it too?

About the author: Brett Cornell brings to e-sourcing software leader CombineNet more than 20 years of procurement and category management experience from executive roles at Johnson & Johnson. He is CombineNet’s senior vice president of strategic sourcing.