Estimated reading time: 5 minutes
• Strategic sourcing is a practice in procurement that seeks to utilize a single, integrated process for purchasing and supply chain management.
• Strategic sourcing tailors data collection, spend analysis, negotiation, market research, and contracting to achieve profitability and efficiency in purchasing and supply chain management.
So, as opposed to sourcing which is the actual purchase of products and services, strategic procurement aligns data and decision-making, streamlining complex procurement undertakings and maximizing purchase processes.
Brand ambassadors and product managers get the most credit for successful product design and launches. But usually, the uncelebrated champion is the team that handles strategic sourcing.
Behind every great product, there’s a great team of people working to ensure the availability of the right resource inputs. And beyond just prices, strategic sourcing teams work hard to achieve the following:
- Offer standardized prices
- Improve operational efficiencies
- Nurture strong supplier relationships
- Increase the quality of goods and services
- Eliminate low-quality suppliers
- Diversify and improve the supply chain
- Share the best sourcing practices in the organization
However, strategic sourcing teams must consider excellent approaches to sourcing to solve these milestones.
A World-Class Strategic Sourcing Team Must Consider
Below we look at six things a world-class strategic sourcing team must consider:
1. Price
There’s no doubt that cost is the leading factor to consider when doing strategic sourcing. Costs must be aligned with the available offerings and match those of competitors.
For instance, financiers and lenders go into a frenzy when they discover their subsidiaries overspend on fewer priority areas. Spending more on fewer priority areas goes contrary to strategic sourcing.
For instance, purchasing products for exceedingly high amounts of money – products that don’t commensurate with the value they bring – violates strategic sourcing.
According to a statistical analysis by Deltabid, there are fewer and fewer saving opportunities the more a product moves down its lifecycle. However, design proves a great opportunity to save and cut costs.
According to Deltabid, over 90% of end products are postulated, formulated, and actually decided at the engineering stage. And as your production goes full cycle and full speed, your cost-saving opportunities dwindle further, leaving less to be admired in terms of predicted accrued incomes.
That’s why it’s critical to have a focused strategic sourcing team assembled from the start.
2. Quality
Strategic sourcing concurrently seeks to pursue cost-saving opportunities while optimizing quality outcomes or qualitative gains. It’s the focus of strategic sourcing to pursue cost-saving opportunities while maintaining a focus on product quality.
For instance, volume price breaks offer buyers or organizations cost-saving opportunities for quality products. A world-class sourcing team must be able to source quality products aligning with customer needs and their base profits.
A key approach to improve quality is to turn your focus on strategic inventory management – to increase counts while saving time doing quality checks. Strategic sourcing teams must reconcile competing interests between quality and affordability. Strategic sourcing teams must offset their financial liabilities while realizing long-term quality outcomes in products and services.
3. Spend categories
World-class strategic sourcing teams are not obstructed by tunnel vision. They see beyond it – casting the net wider to gain visibility on total category spends. World-class sourcing teams ask themselves whether their sourcing goals and tactics conform with long-term organizational growth strategy.
World-class teams throw resources at the right spend categories, seeking opportunities to improve quality while reducing costs. These teams jump onto opportunities that align with their long-term growth strategies.
One way sourcing teams achieve cost savings and add value is by leveraging savings on spend categories. Levering spending in one-way sourcing teams can achieve cost savings on product categories.
These sourcing teams do not restrict themselves to tunnel vision. They examine cost-saving opportunities through activities like streamlining suppliers by managing them across multiple lines.
In addition, strategic teams improve cost consistency, save on bulk purchases and ultimately drive down costs by seeking discounts for bulk purchases – or simply seeking better total pricing for blanket orders.
This old-fashioned ‘economies of scale’ approach is a long-term cost-saving opportunity for world-class strategic sourcing teams.
4. Partnerships
World-class sourcing teams opt for long-term business relationships but most small procurement teams prefer one-off, transactional engagements. Partnerships between buyers and strategic vendors align goals, creating efficiency, synergy, and experience.
In addition, collaboration with strategic vendors standardizes internal processes, leading to greater efficiency, accountability, transparency, and ease of doing business.
5. Strategy alignment
A world-class sourcing team will consider sourcing strategies uniquely adapted to your business needs and requirements. This team will align their sourcing strategies and tactics with your supplier selection – strengths and capabilities.
A world-class strategic sourcing team must show a clear vision of aligning different business areas to deliver long-term outcomes.
As a result, this team will not lag in adopting sourcing strategies that consistently meet and respond to the organization’s growth strategies and long-term vision.
6. Best-of-breed technology
A world-class sourcing team is aware that technology is changing, and they must change with it. World-class teams quickly adopt on-demand technologies that ensure faster and more streamlined access to data.
World-class strategic sourcing teams work with up-to-the-minute applications, conduct spend analysis on the go, and access purchase requisitions remotely. These teams understand that strategic sourcing relies on best practices, including cutting-edge technology.
Alongside the best-of-breed technology are best practices that strategic sourcing teams must consider. Organizations with hefty spending benefit from directors who meet, share, and discuss procurement best practices.
So, considering the criticality of information-sharing in sourcing processes, especially in organizations with hefty spending, it’s critical to see why world-class sourcing teams must use only the best practices in their sourcing.
Contact ProcurePort for strategic sourcing solutions.