Understanding The 7-Step Strategic Sourcing Process Flow

Businesses looking to regain their footing and productivity levels will need innovative ways to do this. Strategic sourcing rises to the fore as one of the best practices organizations can utilize to not only reduce costs and boost their bottom lines but also improve overall efficiency.

In this post, we’re going to unpack AT Kearney’s 7 Steps of the Strategic Sourcing Process flow and show you how leading organizations rely on these points to drive their procurement efforts.

We briefly discuss all point Listed Below.

Step 1: Category Profiling

The very first step in the sourcing process centers around the description of the category. You want to ensure you’ve correctly profiled the category and provided as much information regarding what you intend to purchase as possible. This means listing out the product quantities, taking into consideration aspects such as sizes, types, and volumes.

To help you break down clearly what it is you really need, you can answer the following questions:

• What are we buying as an organization?
• What are the quantities we have ordered?
• Who are the vendors we’re working with?
• Who is our primary customer?
• How much money are we spending?

To help you answer the last question, it can be worthwhile to first study a spend analysis example.

Step 2: Supply Market Analysis

Once you know your categories and what your organization requires, it’s time to search for suitable vendors. Because your primary task is sourcing at the most cost-effective price, you’re going to have to examine the supply market – scrutinizing both the local, regional, and international supply base.

During this stage, you’re trying to understand all the risks, cost drivers, labor fees, and transport considerations. The insight gleaned will be extremely invaluable for purchase managers as it gives them the necessary leverage required to negotiate better contracts.

To obtain said information organizations may send out representatives to attend trade shows, conferences, expos, trade fairs, or consult with experts.

Step 3: Sourcing Strategy Development

With all the insight you’ve gathered in step 2, it’s time to create a sourcing strategy. This is when you use all the research data to put together a profile of the type of supplier you want to work with, including the qualification criteria they need to meet. This will greatly assist you in narrowing your vendor pool.

You can also look at the suppliers you’re currently working with and what things they aren’t providing that you wish they could provide. Add this to the qualifying criteria. The qualifying criteria are the minimum requirements suppliers need to meet in order to do business with you.

Step 4: Issuance of Requests for Information

With a rock-solid list of minimum requirements, vendors must possess to be considered, it’s time to call for bids. The strategy that is most in use for soliciting these bids involves the issuance of RFXs – i.e. requests for proposals (RFPs) and or requests for quotes (RFQ).

Whichever method you opt to use to get bids, it’s key to remember to include your qualifying criteria. This will ensure that you get vendors who meet your specified requirements and can provide you with the products or services required at the correct price points and time frame.

Because of the vast nature of this undertaking, most sourcing experts rely on sourcing solutions such as those provided by ProcurePort to assist with oversight of the whole process. Such technology accelerates sourcing and contracting, simplifies administrative tasks, and keeps communication on a centralized platform.

Step 5: Selecting Desired Vendors and Brokering the Contract

The fifth step in the Strategic Sourcing Process flow involves choosing your suppliers and negotiating the terms and conditions. With the answers received from the RFP process, a handful of suppliers may then be invited to a reverse auction online.

Other sourcing teams prefer to conduct in-person interviews instead of holding an auction. Whether it’s an interview or auction, this is usually the final step before a vendor is chosen.

Once the preferred vendor has been identified, buying teams move into the contract negotiation phase where terms and conditions are ironed out.

Contract management is an entire function all of its own, and one which if brokered correctly can open new avenues to further bring down the price for the buyer.

Step 6: Communication and Implementation

Following the contract negotiations and brokering, it’s important to remain in contact with successful suppliers as you move onto the implementation stage of things.

Being transparent with vendors about any changes is vital. So, you’ll want to rope in someone from their side into your meetings or discussions so that they also stay abreast of any developments and updates on your end.

Step 7: Evaluation of the SSP and Vendor Performance

The market is never static. It is always changing. For this reason, it’s crucial to constantly re-evaluate your SSP model to see where it’s falling short and thus find ways to improve it.

It’s also highly recommended that you routinely appraise your vendors to see whether they are indeed meeting expectations. Supplier performance management can be carried out using a pre-determined set of key performance indicators (KPIs).

Read: What is supplier performance management? SPM guide

How ProcurePort Assists with Strategic Sourcing

In a post-COVID world, businesses seeking to bounce back need all the help they can get. This means turning to the leading procurement software providers for sourcing solutions that will help you regain any lost market share and streamline the Strategic Sourcing Process flow.

For easy and affordable technologies, trusted by organizations such as UNOPS, HUD.GOV, and conEdison, look no further than ProcurePort.

To see our software in action, schedule a free demo today. Alternatively, contact us to discuss tailored procurement solutions.