The development of optimal outsourcing solutions to achieve desired business outcomes.
Strategic sourcing is often confused with procurement – a transactional and renewing commodity.
Strategic sourcing involves evaluating the needs of, and impact on, the business of whatever good or service you are sourcing – then going to market with a comprehensive plan and process to achieve the preconceived business outcome.
Procurement vs Strategic Sourcing
Procurement refers to the day-to-day transactions and processes that an organisation uses to acquire products and services, while looking for the lowest-priced option, while managing purchase orders, invoicing and payments.
Strategic Sourcing done well is critical to an organisation’s success. It emphasises the activities leading up to an actual purchase, including analysing business needs, historical spending and the marketplace offerings. Strategic sourcing involves evaluating the needs of, and impact on, the business of whatever good or service an organisation is sourcing, then going to the marketplace with a comprehensive plan and process to achieve the preconceived business outcome.
Why is strategic sourcing important?
At the heart of strategic sourcing is the opportunity to build long-term relationships with suppliers, who are selected based on their capability and their compatibility with the business’s needs and goals, creating an efficient transaction model
This dependability could lead to more benefits than just getting the right products and services at the time they are expected; making it easier to identify risk, forecast sales, and cope in times of shortages. Strategic sourcing also motivates the organisations to consider their supplier for other sourcing decisions, and motivates the supplier to continue their pattern of reliability so they could benefits for any future business.
These strong relationships make it easier to identify risk, forecast sales, and cope in times of component shortages.
Strategic Sourcing process steps
These include the following:
Analyse the product categories, the spending patterns and departments involved.
Analyse the supplier market, including potential new suppliers
Develop a sourcing strategy based on the goals of the business
Select the sourcing process and defining your request for proposal criteria
Select suppliers and negotiate best deals to align with business objectives
Onboarding any new vendors and integrate suppliers into existing processes,.
Create measures and track performance metrics of the sourcing plan
The most obvious advantage of strategic sourcing is the reduced total cost of items and services purchased.
Strategic sourcing processes are used to help organisations exploit the available data on purchases, suppliers and business processes, and increases the organisation’s understanding of supplier markets which assists in identifying potential risk factors and help organisations improve their sourcing plans while mitigating risks.
Strategic sourcing can also improve relationships with suppliers and assist in the identification and management of potential improvements to improve overall efficiency.