Across all industries, regions, and ESG dimensions, regulations are progressively expanding. This necessitates improving your eSourcing strategy while also making sure that internal regulations and external obligations are followed. Risks of non-compliance result in loss of assets, legal trouble, and reputation.

However, the control mechanisms used in manual sourcing processes are inadequate to ensure compliance at scale across global sourcing activities. Compliance can be challenging if and when spreadsheets and emails are used exclusively.

This emphasizes the necessity for balanced sourcing, which involves pursuing value alongside rigor. Efficiently achieving this is made possible by the structure and intelligence offered by eSourcing platforms. In regulated scenarios, compliant yet competitive sourcing is essential.

Let’s examine how a good eSourcing strategy enables organizations to sustainably maximize value by design.

Navigating the regulatory maze in eSourcing

Various regulations now impact how sourcing is conducted, spanning categories like data, sustainability, and geopolitical tensions:

Data Protection

RFP supplier data demands must adhere to stringent restrictions mandated by laws like the General Data Protection Regulation (GDPR), which call for security and minimization of information collection. Non-compliance invites heavy penalties.

ESG Considerations

Investors and authorities have mandated environmental footprint disclosures throughout the supply chain due to the risks associated with climate change. Suppliers must be evaluated on ESG. According to an organization’s ESG strategies, certain parameters may also be added to the supplier discovery, evaluation, and onboarding processes to ensure compliance.

Geopolitical Tensions

Trading prohibitions in some regions and denied party lists must be complied with by sourcing companies. Export compliance is fundamental, particularly in industries like high-tech, aerospace, etc.
Recent sanctions on trade with Russian entities make this point all the more pertinent. The problems above arise from the lack of controls in manual procedures. Unstructured data requests, for instance, could be prohibited in emails and attachments. Side negotiations evade oversight on compliance.

This calls for balancing the dual priorities of value extraction and adherence to obligations. eSourcing platforms enable embedding compliance proactively through:

• Directed purchasing processes based on internal policies
• Templates for structured RFPs collecting only pertinent supplier data
• Risk assessment of vendors who have ESG credentials
• Access controls and secure document exchange
• Comprehensive audit trails confirming compliance

Plugging compliance leakage in eSourcing

Certain inherent risks in manual, fragmented sourcing lead to compliance gaps that must be addressed:

Policy Misalignment

Buyer actions are constrained by sourcing policies and playbooks. On the other hand, gaps for non-compliant actions exist due to the lack of cross-functional policy consistency.

Decentralized Processes

When there is a lack of standardization and control in the sourcing process, buyers may take shortcuts that result in policy violations, such as engaging in unauthorized negotiations or choosing the wrong supplier.

Weak Audit Trails

Reconstructing multi-party interactions is challenging due to email and spreadsheet-driven sourcing. The lack of audit trails renders non-compliance impossible to detect or prevent.

The above risks lead to vulnerabilities like:

• Value loss from contracts as a result of unauthorized discussions
• Inability to adequately respond to external audits
• Unapproved supplier decisions and objectives being compromised
• Missed detection of severe compliance violations

To plug these gaps, top eSourcing platforms facilitate:

• Playbook-driven, policy-aligned procedures that direct purchasing
• Complete audit records of supplier interactions and history of negotiations
• Configurable approval workflows with sourcing supervision
• Flagging of high-risk transactions using analytics
• At its core, digitization and discipline ensure compliance is sustained at scale across global sourcing activities through actionable intelligence.

Cornerstones for institutionalizing compliance

A compliant eSourcing strategy requires getting the basics right by establishing four cornerstones:

• Aligned Playbooks: Document sourcing standards, policies, and procedures into playbooks. Conduct training to ensure that all procurement teams are using legal purchasing methods.
• Controlled Workflows: Set up system procedures that correspond source methods to playbooks. Include approvals at significant process checkpoints for oversight.
• Secure Supplier Data Exchange: Transmit confidential data such as RFPs and bids securely via permissions-based portals rather than emails.
• End-to-end Audit Trails: Capture thorough records of supplier interactions, bid submissions, and negotiation history for later audits and proof of compliance.

Enablers include:

• AI chatbots that respond to inquiries about supplier policies
• Playbook-based guided purchasing processes
• Analytics engines that detect transactions that are not compliant
• Risk evaluation of suppliers and catalogs
• With the aforementioned pillars, non-compliance can be systemically discouraged, immediately identified if it occurs, and remedied from the underlying cause.
• Compliance becomes a core capability woven into the fabric of eSourcing.

Establish guardrails for compliant sourcing

Increasingly, organizations seek to ingrain compliance into their sourcing DNA versus retrofitting controls after the fact. A robust eSourcing suite provides embedded capabilities to enable compliant strategic sourcing, including:

• Guide Buying with Guardrails — Configure workflows with mandatory steps and guided selections based on playbook standards for procurement compliance.
• Tailored Templates and Workflows — Develop RFX templates and approval workflows specific to each category and region to meet local regulatory requirements.
• 360° Transparency — Visibility into the sourcing data and drill-down reporting enable the identification of any non-compliant acts.
• Proactive Risk Analysis — Integrated supplier risk profiles ensure sourcing managers have visibility into risks to guide decisions and avoid non-compliant partners.

Taken together, these constructs instill conforming behaviors that are ingrained from the beginning rather than as an afterthought. On the basis of pre-configured guardrails, procurement teams are enabled to make suitable choices at each stage of the sourcing process.

Automating compliance procedures rather than performing retrofit audits provides more agile and resilient sourcing. Instead of waiting for drawn-out audits, teams can make course corrections immediately in response to alerts.

Finally, while it’s of paramount importance to optimize processes & your tech stacks for compliance, a high second priority is also user experience & adoption. Often, in procurement, non-compliance is also born of having to use clunky tech and follow cumbersome processes.

Future-proof your eSourcing for evolving regulations with Zycus iSource

With proliferating regulations, your eSourcing strategy must keep pace to enable continued compliance. Organizations involved in procurement need an eSourcing compass that is tuned to these disruptive influences. One firmly rooted in conformity yet being adaptable enough to change course as necessary.

Zycus iSource provides that compass. Our eSourcing suite is designed for visionaries who are navigating challenging new routes to value generation. We incorporate compliant guardrails without compromising the agility required by procurement. Despite increasing complexity, our cutting-edge Merlin AI and its seamless communication with all modules of our suite help optimize decisions.

Together, these building blocks make compliance part of the sourcing process rather than an afterthought. The end-to-end eSourcing suite’s compliance capabilities readily integrate with sourcing analytics, supplier risk profiles, contract drafting, and procure-to-pay. This links the compliance puzzle pieces from source-to-pay.

The future has many uncertainties, but one certainty – procurement must be ready. Make compliance intrinsic to your sourcing DNA with Zycus iSource. Let AI and automation provide control without compromising agility or resilience. Sign up for a demo today to learn more about ingraining compliant sourcing.

Related Reads:

1. Building a Business Case for Strategic Sourcing Suite
2. A Guide to Source-to-Contract Optimization
3. Efficient Procurement Measures for Effective Cost Benchmarking