Sourcing Optimization: Digital Transformation of Procurement Processes

Sourcing Optimization

Sourcing Optimization: Digital Transformation of Procurement Processes

Strategic procurement is becoming increasingly complex due to economic uncertainty, stricter regulations and compliance, globalization, geopolitical volatility and natural risks. Still,  procurement teams are assessed on their ability to reduce costs and increase savings despite changing scenarios. They are not only responsible for strategic, reliable, and responsible sourcing but also to develop relationships with the suppliers whilst ensuring innovation. 

Procurement teams often face challenges in sourcing decisions. Moreover, without the right tools and technology, it may get difficult when comparing and choosing between suppliers to make award decisions. That is why a strategic sourcing model that takes advantage of technology and automation is required to maximize the efficiency of the processes and the team. 

Why Sourcing Optimization Needs to be Mainstream 

Sourcing optimization is not a new buzzword. It is a process that is a combination of mathematical models and software that enables businesses to gain better value by evaluating and improving activities associated with purchasing and supply chain management. It is primarily used to analyze received bids to select the most optimal and cost-effective supplier under given time, cost, and quality limitations. 

Although considered a complex, advanced e-sourcing tool in the past, sourcing optimization has been adopted by businesses to remain at the forefront of evolving challenges and procurement technology. So, why is there still a gap in the mainstream implementation of sourcing optimization especially for procurement teams aiming for digital transformation? 

Some professionals are still apprehensive and believe it to be complicated or unnecessary and continue to rely on spreadsheets or e-sourcing software. Others only see its application in specific industries such as transportation and professional services. Notably, procurement teams often feel stuck as they continue to use old tools to manage new constraints and challenges, without getting the required results. 

Contrary to the belief, post-sourcing optimization, many businesses have reported cost-savings in their bidding event, strengthening of supplier relationships, and improvement in the best practices. 

How Does Sourcing Optimization Work? 

For sourcing optimization, firstly you require the right software. Depending on the needs of your business, your e-sourcing tool needs to be equipped with analytics, real-time data sharing, and eRFX tools. When it comes to an advanced sourcing optimizer, it should have the right applications in its bid optimization platform. 

Your software should support your swift and data-driven decision-making. For optimizing operations, it should allow you to apply various rules under a given scenario to choose the best trade-off between operational efficiency and cost savings. This will require setting a rule, testing and applying a number of rules  and scenarios, and finally making decisions in no time instead of days or weeks.  

Primarily, a sourcing optimization software should be able to help you::

  • Set up and create events (scenarios)
  • Manage and analyze responses from the suppliers
  • Award contracts effectively by reducing the bidding cycles
  • Access price and non-price information 

Sourcing Optimization for Digital Procurement Transformation

Here are some of the benefits of adopting sourcing optimization. 

  • Provides a high ROI: When it comes to adopting digital procurement solutions, it is important that the solution should support cost–saving measures and streamline sourcing activities whilst offering the maximum return on investment. Undoubtedly, it is a vital performance metric. Sourcing optimization provides benefits to your procurement team and other associated departments that are not achievable through legacy systems including spreadsheets and also offer a high ROI. 

  • Enhances efficiency and automation:  Although excel sheets help procurement teams in data management, adopting a sourcing optimization technology offers more flexibility, ease-of-use and time saving. Many experts believe that using spreadsheets for managing events limits the number of suppliers that can be invited. This happens because it gets cumbersome to collect, sort, and standardize such a large amount of data manually. Sourcing optimization on the other hand automates your activities even when hundreds of suppliers are involved. It also ensures data is traceable across the bidding activities and offers the option of flexible bidding, supporting cost-saving opportunities. 


Moreover, sourcing optimization solutions also reduce the back and forth with the suppliers, saving time and increasing efficiency of the team. With real-time bid feedback, modern e-sorurcing tools with in-built AI-powered optimization allow users to add data swiftly and create bids wherein over 90% of the sourcing event can be configured in just a few seconds!

  • Supports different spend categories and event sizes: For any digital procurement solution, scalability is critical. This means the procurement teams involved with large events involving thousands of suppliers, bids,, thousands of line items should be able to use sourcing optimization effectively. With that being said, smaller events also need sourcing optimization when multiple locations are involved along with cost breakouts, capacity,or minimum order quantity. Thus, it can be rightly said that sourcing optimization is not limited only to certain categories or events.  


In optimization, it is not as straightforward as awarding a contract to the lowest bid.  Often additional challenges such as new stakeholders,  policies on corporate social responsibilities, sustainability issues etc. need to be considered when making a decision. This is where access to the right tools can equip procurement teams to manage such constraints effectively. 

Final Words 

An increasing number of businesses are keen towards sourcing optimization technology given its many features and benefits across spend categories and events. Helping reduce cost and time-to-award, sourcing optimization has helped boost teams’ productivity and efficiency, thus offering various unique advantages over regular esourcing solutions. Now, is the time to assess whether you need to  deep dive and invest into sourcing optimization for your business! 

To know more about how Induzbuy is helping businesses digitally transform their procurement processes including contract management, reconciliation, sourcing, vendor management, and more, get in touch with us today!