What is Strategic Sourcing?

A company’s supply chain has a significant role to play in driving its production capability. If your firm has an effective supply chain, it can address the changing demands of global consumers. Most importantly, you can produce goods and services with minimal disruptions and maximum value and savings for your company. When there are instances of disasters, the supply chain management of firms gets affected. With a strategic sourcing policy, you can minimize this chance and thereby, saving your firm from the rocks of financial ruin. Take suggestions from sourcing agents to get the necessary market insights.

If the right practices and tech tools are applied to the strategic sourcing activities of organizations, companies can optimize their essential procurement processes. It also creates a strong and diversified supplier base. This helps organizations to make informed sourcing decisions that ensure their business needs are met. It also protects an organization from all sorts of business risks.

Concept of Strategic Sourcing

Strategic sourcing is very different from the prevailing sourcing concepts. It is a formalized methodology implemented by firms for collecting, managing, and analyzing information to make a calculative business decision. New-age firms are shifting their focus from traditional procurement processes to leveraging strategic sourcing. Besides focusing on cost reductions and price points, firms are also concentrating on maximum value generation while attaining the lowest possible cost of ownership.

Modern-day firms hire sourcing consultants to streamline their procurement processes. With their advice, organizations can meet their business requirements and long-term goals. This approach of firms preserves business continuity and maintains financial health in both good times and bad. With the effective implementation of strategic sourcing policies, firms get a chance to enhance their performance, efficiency, savings, and value.

Steps in a Strategic Sourcing Process

The steps involved in a strategic sourcing process are listed below:

Supply chain assessment: This is the first step in a typical strategic sourcing process. The role of procurement professionals is to perform detailed spend analysis and evaluation of all the products and materials used by the business. This includes direct materials like raw goods and indirect materials like office supplies.

Supplier analysis: Assessment of the current supplier market is mandatory for any firm. Thereafter, the companies set criteria for their suppliers. Developing a portfolio of current and potential suppliers with the assistance of sourcing agents is also needed.

Document development: Firms should create templates for important documents like supplier onboarding agreements, purchase orders, etc.

Contract negotiations: This is another important step in a strategic sourcing process. Companies need to connect with vendors to negotiate terms and conditions when it comes to purchasing activities.

Supplier onboarding: After organizations select the suppliers, they are onboarded and integrated into P2P workflows. This is performed via formalized contractual agreements or outsourcing.

Strategic sourcing is a complex process and to tap the full potential of it, companies need to be meticulous in their approach. Sourcing consultants help organizations to implement their strategic sourcing policies in a phased manner. Engage in strategic sourcing activities if you want to pile up profits for your firm.