Sourcing Deficiencies Cost Mid-size Enterprises $134 Billion Annually

Aberdeen report benchmarks sourcing effectiveness, identifies best practices for strategic sourcing in the mid-market

Willow Grove, PA — January 11, 2006 — Most mid-size enterprises lack disciplined sourcing practices, category expertise and spending power to negotiate and maintain competitive supply chains, according to a new Aberdeen Group benchmark report, Strategic Sourcing in the Mid-Market Benchmark: The Echo Boom in Supply Management.

Aberdeen estimates that such deficiencies are costing mid-size firms in the United States $134 billion a year in missed supply savings opportunities.

Aberdeen's benchmark of 133 procurement and supply chain executives found that continued pressures to reduce costs and improve spending visibility and control have made strategic sourcing improvements a priority for most mid-size enterprises.

Mid-size enterprises missed out on the first wave of supply management automation and improvements, said Tim Minahan, Aberdeen's senior vice president, Global Supply Research, and author of the report. Continued pressures to reduce costs and compete in global markets have made strategic sourcing improvements for mid-size firms not just a priority, but a necessity for survival.

According to the study, more than half of mid-size companies have either launched initiatives to formalize and improve strategic sourcing capabilities within the past year or will do so within the next year.

Aberdeen recommended the following practices to formalize and improve strategic sourcing:

  • Develop and enforce standard sourcing procedures company-wide;

  • Hire sourcing and commodity expertise, including consultants;

  • Improve access to and quality and analysis of corporate spending;

  • Enlist executive support for resources and policy changes; and

  • Leverage commercial sourcing management automation.

Mid-size enterprises that used these strategic sourcing techniques recorded more than four times greater procurement cost savings, better supply performance and greater profitability than industry peers, said Minahan.

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