e-Sourcing Savings Up

Volumes sourced online down, but cost savings up in Q3, Aberdeen survey reveals

Boston, MA  January 23, 2003  e-Sourcing is producing increasing savings for enterprises, although e-sourcing volume dipped in the third quarter of 2002, according to the results of a survey by technology consultancy Aberdeen Group.

Aberdeen's e-Sourcing Index (ESI), based on a quarterly survey of e-sourcing practitioners associated with the consultancy's ESI Advisory Council, showed that the council's members "e-sourced" about $68 million worth of goods and service in the third quarter, down from the $76 million that they purchased through e-sourcing in the second quarter.

But the survey also showed that the average percentage cost savings negotiated through e-sourcing increased in the third quarter against the previous period, reaching 16.7 percent. As a result, the ESI, which debuted in the second quarter of last year and tracks sourcing volumes, commodities sourced and savings by commodity, rose in the third quarter against the previous period.

"The spike in the Q3 ESI is a clear indication that e-sourcing continues to uncover savings for buying organizations in many industries," said Tim Minahan, vice president of supply chain research at Aberdeen.

As in the second quarter, parts and assemblies, as well as services, topped the list of spending categories sourced through electronic means. In the third quarter, paper products rounded out the top three e-sourced categories, bumping information technology products off the list of leading categories.

Also this week, Aberdeen released its latest "Supply Chain 50," a quarterly ranking of publicly-traded supply chain technology companies. Aberdeen tracks the firms' overall dollar increase in revenue, revenue growth in proportion to their own size, profitability posture and improvements, and increased market share. Notable performers in the third quarter included DataStream, Nexprise and Manhattan Associates, according to Aberdeen.

"Supply chain pros expect a market stabilization or slight pickup in SCM [supply chain management] spending in 2003," said Minahan. "Surviving SCM vendors will look and operate much differently than before the downturn started."