How dynamic sourcing is rewiring supply chain networks
Dynamic sourcing is a system utilising automation and agile processes to strategically navigate and establish control within the pandemonium of in-flux supply chain networks.
During the pandemic, inflation soared–and it’s still a factor in today’s marketplace.
Furthermore, while on the mend, supply chain capacity is still adversely impacted by the damage done during the global supply chain crisis.
These issues have caused procurement leaders to contemplate the most proactive responses and strategies to empower their sourcing teams.
The volatile environment fostered by the pandemic was eye-opening to industry executives and management.
Many have realised the need for improved systems for managing bid events. Namely, they've grasped how it's finally time to move on from manually-initiated sourcing processes requiring excessive back-and-forth communications. These leaders have realised the futility of an overreliance on constant data checking and correcting, acknowledging how it disrupts efficiency and promptness.
To flourish amid the chaos, sourcing leaders who embrace cutting-edge approaches have left traditional cycle-based sourcing behind. They’ve adopted a recent innovation: dynamic sourcing–a system utilising automation and agile processes to strategically navigate and establish control within the pandemonium of in-flux supply chain networks.
Why is it time to evolve from traditional cycle sourcing?
Reactionary measures will hamper most sourcing functions. Traditional processes that worked in a pre-pandemic world can’t suffice with new-world problems and volatility.
Manual processes cause bottlenecks in the sourcing cycle–a stifling force in today’s fast-moving market.
This isn’t to say technology wasn’t prevalent in supply chains pre-covid. Annual events, specifically, have long been backed by tools of the digital transformation era. Issues arise when off-cycle events, route guide failures, and new lanes are manually managed via emails and Excel.
Manual processes cause bottlenecks in the sourcing cycle–a stifling force in today’s fast-moving market. Also, greater effort and resources are required for these unrepeatable manual approaches.
Traditional cycle-based sourcing strategies include the following components:
- Annual events include fixed one to two-year pricing and all known lanes.
- One to two months are needed to prepare for event setup. An additional month will be required to fully deploy new rates.
- Adhering to standard award and rate structures across these events is more challenging with outdated technologies.
- Annual buying business rules aren’t always aligned with annual and spot buys, which are generally new requirements.
- Routing guides erode, and pricing goes stale throughout the year.
- Rapid action is prevented by extended cycle times.
- Speed to deploy events is less of a factor, and results are less of a priority because of long-term fixed contracts conducive to supplier extensions and delays.
Embracing a need for speed
Businesses are made up of people who can only be as productive as manual processes will allow them to be. Automation (often combined with AI) offers sourcing teams the keys to economic growth and peak productivity.
Dynamic sourcing tools and tech embrace innovation and automation to offer the following benefits:
- Insightful risk management.
- Learning from previous projects and initiatives.
- Helping users outperform business benchmark.
What is Dynamic Sourcing?
Holding rates on a fixed contract no longer makes sense in today’s fluctuating landscape. Therefore, bidding for spot rates–one-off transactions–is necessary to meet demand.
Industry leaders have dived headfirst into this shift, pivoting to dynamic mini-bid monthly/quarterly cycles. These features are paired with year-long adjustments that ebb and flow with capacity accommodations and scarcity-based fluctuations.
Speaking to the innovation at play, many refer to this adjustment as a sourcing refresh. In short, automation enables sourcing teams to run fair, transparent events at the required cycle while locking in rate and capacity.
Off-cycle events will help confirm and leverage market rates and bridge potential gaps.
Adhering to dynamic sourcing practices empowers supply chain leaders to respond proactively to volatility. With the related tools, sourcing teams can refresh on an as-needed basis. This also improves CFO reporting since current rates can be used after each refresh instead of annual data based on old rates.
Something else worth noting is how annual events stay put with dynamic sourcing. Such go-to functions won't be left behind and can contribute to a vastly bolstered bottom line. However, off-cycle events will help confirm and leverage market rates and bridge potential gaps.
What are some key supply chain benefits of dynamic sourcing?
Dynamic sourcing tools minimise risk by implementing a single-threaded collaborative sourcing process to align annual and off-cycle events.
Furthermore, dynamic sourcing tech makes events standardised, normalised, easily repeatable, and all-around low effort.
Refresh cycle frequencies (powered by dynamic sourcing tools) move in lockstep with expiring rates and market changes, granting users access to broad capacity options and competitive market rates.
Best-in-class dynamic sourcing tools can integrate with existing tech to collect vast heaps of data that powers smart automation.
What role does automation have in dynamic sourcing?
Dynamic sourcing is driven by automation and digital transformation.
Adopting automation is the only way for sourcing teams to stay ahead of in-flux economic conditions and maintain control over services and costs.
Sourcing teams often get too bogged down by reactionary processes and distract them from the clearest root to optimal efficiency, cost savings, and additional capacity. Dynamic sourcing automation tools will rectify these issues, helping teams take the leap to market-based sourcing and improving their overall productivity and bottom line.
Through automation, top-tier supply chain teams can flourish to their fullest because they can move swiftly. They won’t get trapped in the minutiae and can focus on their core competencies and big-picture objectives to drive growth.
Industry-leading sourcing automation tech increases business standards while reducing workloads–the best of both worlds. Furthermore, best-in-class dynamic sourcing tools can integrate with existing tech to collect vast heaps of data that powers smart automation.
Conclusion: examining the broader picture of automation and digital transformation beyond the dynamic sourcing lens
Dynamic sourcing automation speaks to society’s growing adoption of innovation and digital transformation to keep up with a rapidly changing world.
Looking beyond supply chains, statistics from 2021 show that automation added $195 Billion to US Monthly Business Revenues and £14 Billion in revenue for UK businesses. These statistics are from two years ago–the technologies have only grown more advanced since then.
Whether revolutionising the supply chain or driving innovation in eCommerce, small business, or even entertainment, automation has emerged as a leader in the digital transformation era. Businesses that embrace these technologies will be the ones that experience sustained, mind-blowing growth.