Old sourcing methods and strategies may hinder growth and lead to lost opportunity and increased costs. By leveraging new sourcing methods and strategies available in 2023, organizations can focus on more important things, and there will not be the stresses of lost opportunity. The old methods of sourcing hold businesses back, and nothing stops someone from focusing on their core aspects, like keeping multiple vendors manually.

For example, organizations are making changes to become carbon neutral by 2025, have artificially intelligent business systems, or source only from green suppliers. However, none of these organizations might have the appetite and nimbleness to change their strategies, processes, and operations for good. In some cases, organizations are changing their perspectives and trying to be innovative in restructuring their traditional practices, and in others, marketing an innovative practice is enough.

Disruption has caused challenges for organizations to stay ahead of emerging uncertainties and change, creating a situation for procurement and supply chain professionals to win accolades as important players in organizations. While globalization and consumer expectations for transparency, sustainable development, and technology adoption have highlighted the importance of procurement, these outdated business behaviors cannot yield innovative outcomes. In light of this situation, it is time to abandon obsolete practices and to adopt tech-enabled strategic sourcing approaches in procurement.

What Is Traditional Sourcing?

Traditional sourcing strategies in procurement involve a process that takes longer and often has more activities to obtain the correct suppliers for goods and services. Traditional buying strategies involve inquiries from customers, visits to factories or wholesale markets by buyers, and often many conversations back and forth. Some of these processes can be disjointed and not well documented. Consequently, traditional sourcing strategies can limit today's demands of speed, transparency, and efficiency in procurement practices. The main pitfalls of traditional sourcing practices include poor clarity, unsystematicness, and no reliability. All of which impede on procurement's transparency, efficiency, and sometimes precision. In contrast, strategic sourcing focuses on the correct channels to obtain the right supplier that aids in ensuring the products or services are right.

Traditional procurement challenges

The procurement process has always involved multiple parties, price negotiations, and logistics back-and-forth in construction. The procurement process can add additional time to the procurement, and therefore the availability of materials is subject to price fluctuation due to market forces, availability, and geopolitical factors. Transparency can leave much to be desired, enabling disputes, delays, and expenditures, frustrating project outcomes. Ultimately, to deal with the aforementioned problems, a number of startups are interested in providing ways for businesses to procure materials more efficiently with the help of technology and digitization. These startups hope to streamline the procurement process, thereby enhancing project performance outcomes.

How Digital Procurement is Disrupting Practices

Responsible Sourcing

• Sourcing is an important component of procurement strategy, representing the buyer and supplier organizations' first point of contact.

• Sourcing traditionally referred to the buying organizations simply selecting suppliers based on low-cost selection methods but is now evolving to include sustainability, environmental friendliness, quality, and creativity.

• The demand from consumers for ethically sourced and sustainably produced products is increasing. The procurement team must consider the marketplace demand in sourcing responsibly.

• The responsibility of responsible sourcing is shared amongst all stakeholders, suppliers, buyers, and society.

Total Value Ownership (TVO)

• TVO is a comprehensive approach to value creation, encompassing social, environmental, and financial aspects of procurement.

• It seeks to lower costs, increase revenue, improve operational efficiency, reduce risk, enhance sustainability, and help grow innovation.

• Traditional procurement practices did not encourage or care about the outward-facing impacts of suppliers in relation to their top-line value.

Request for Solution (RFS)

• RFS is a new variation of the usual Request for Proposal (RFP).

• RFS is a more collaborative process and requires a looser request from the supplier.

• RFSs are best used when you are looking for an innovative proposal or an innovative solution from the supplier or the marketplace.

Supplier Enabled Innovation (SEI) and Digitalization in Procurement

SEI:

• Suppliers make up 25%-45% of revenues from product innovation.

• SEI drives procurement teams to see suppliers as partners with Supplier Collaboration & Innovation.

• SEI can create a competitive advantage, alignment across an organization, and broaden an organization's intra-competency.

• Having an SEI strategy will create a win-win situation for both buyer and supplier.

Circular Economy:

• The circular economy may make a significant difference in corporate social responsibility and sustainability programs.

• In the ideal circular economy, the lifecycle for a product would take on a 'circular' existence.

• Procurement teams should seek to and procure from suppliers of recycled materials.

• The circular economy isn't just larger than the end product, but it plays a role in restoring natural resources.

Digitalization:

• Technology is the link between people and collaboration at scale.

• Procurement teams are interested in using technology to support processes, optimize strategies, and harmonize existing procurement practices.

Conclusion

The metals sector, and its procurement practice, is at a crossroads between tradition and transformation. It can offer some comfort from the familiar, but traditional sourcing models cannot keep pace with the pace, transparency, and sustainability demands of today's world. Organizations that rely on manual vendor management, opaque pricing, and reactive sourcing will fall behind.

Digital procurement offers a better way, one that embraces agility, collaboration, innovative thinking, and long-term positive outcomes instead of stale, cost-first thinking. It's about supplier-enabled innovation and responsive requests for solutions that reflect a full view of the circular economy, not just digital to digital. Procurement is much more than just 'digital procurement.'

For organizations within the metals sector, the opportunity is clear: shift procurement from ubiquitous back-office activity to generating business growth, resilience, and sustainability. Digital sourcing tools don't just ease back-office work; they unlock the opportunities procurement offers as a competitive advantage.

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