According to the Deloitte CFO Survey of January 2012, 70% of the UK’s CFOs expect to see corporate profit margins decline sharply after a period of strength. Inevitably, the ability to reduce operating costs is cited in the report as the major priority for large corporations. While CFOs still see an opportunity for carefully planned growth, they are more than ever going to be forced to see where they can realise cost reductions across their business in order to protect these margins. One of the resulting key areas of that focus is sourcing at best value.

Despite several years now of harsh trading conditions many organisations know that they still are not doing as well as they could when it comes to securing the best possible deal on the goods and services they purchase. This is particularly the case in regard to non-core operational expenditure – or the equipment and services required to run the business. But I believe there is good reason; it’s because much of the recent cost cutting effort has focused on sourcing the core materials and goods for resale that are considered to be at the centre, not the periphery, of an organisations’ revenue.

Non-core purchasing, despite having a significant impact on bottom line, is often seen as the poor relation of spend control and given correspondingly scant attention. Any action taken to achieve best value in these none-core spend areas is likely to have been restricted to the biggest ticket items. However there exists an extremely long tail of smaller lower spend categories, which when combined add up to a significant amount of inefficiency.

All that is changing. As a sourcing and procurement platform provider we are seeing a demand spike like never before for eSourcing tools and services focused on driving these operational savings. Every stone is being turned and every contract scrutinised, not just for pure price competitiveness but for best value in terms of pricing, scale, service delivery and the most advantageous contract terms. We’re finding that not only is eSourcing a tactical toolkit for organisations, it is also part of their strategy, as controlling organisational costs becomes a boardroom issue.

Suppliers have never had to pay such close heed to their service level performance, with areas such as delivery track record, payment terms for cash flow advantage, and their ability to follow customer’s efficiency automated processes, also under scrutiny.

But while organisations have realised that there is a ‘Special Source’ to be had across the full operational spending spectrum, they now have the job of putting the right building blocks in place to make this possible. This could be a challenging manoeuvre within the confines of economically trying times, which restrict the adoption of expensive skills and new technology. Procurement and finance professionals are faced with two contradictory priorities. On the one hand the business must lower costs wherever it can, yet on the other hand there may be no money available to fund cost saving initiatives. The result can be a paralysing inability for the organisation to change.

There is a solution to this problem however. For organisations in that Catch22 situation of wanting to make savings but not being able to afford the means of doing so, proven and immediate return on investment is essential. While this grates with the normally slow ROI projections from many business software solutions, it’s not the case with some eSourcing platforms. Granted, if you scope, select and choose to install an on-premise eSourcing platform the business will incur large capital costs long before any savings can be made from it in order to cover the budget. If however you select a managed and on-demand eSourcing service such as Wax Digital web3, savings can be realised through the tool right from the outset – savings that far outstrip the costs involved.

This is possible because such services can be used to run early stage sourcing events, such as supplier eAuctions, which then achieve savings on critical purchases and in doing so make the business and ROI case a done deal. Once these early savings have been realised the organisation can much more easily justify ongoing investment in such a service.

When selecting an eSourcing platform it is important to look at areas such as simplicity, intuitiveness and structure, as these all help to ensure that users will accept and make use of the tool without a high cost of training. But ease of use must not be a trade off for functionality. eSourcing platforms must also have broad shoulders. They must offer a veritable kitbag of sourcing automation, including RFP and RFI management, not to mention sophisticated eAuction options. In-built compliance is another must have, as it ensures a secure audit trail and watertight processes that follow industry and government mandated rules.

Of course, well equipped eSourcing services and technology are critical considerations, but they must also be balanced with the right skills. Larger organisations may well have a dedicated purchasing or sourcing function and people with strong category expertise and knowledge of sourcing processes. Smaller organisation might not. In both scenarios, bringing in management consultants to drive sourcing initiatives internally or support existing resources, or simply outsourcing the whole gamut, leads to costly and unquantifiable overheads. With these choices the bar for savings would have to be set extremely high, just to recoup the cost of engagement.

Most organisations’ sourcing initiatives can thrive however with a mix of internal skill, acquired from and supported by specialist sourcing consultants. These experts can advise on how best to approach, analyse and conduct sound sourcing projects in a range of categories. Bringing in practically focused consultants who have spent years in the field and have rich eSourcing event and category expertise is good practice. They know how to extract best value and understand the intricacies of setting up and running online sourcing events first hand.

Increasing the focus on best value sourcing across non-core spend categories is something that all cost and profit challenged organisations should consider. Finding your ‘Special Source’ through a combination of ROI focused eSourcing tools and consultants with their feet on the ground can help businesses to dramatically improve their financial performance and gain better control of what they spend in order to run effectively.