Strategic Sourcing, which is simply defined as the process of identifying, evaluating, and selecting suppliers for goods and services, is already playing a significant role in businesses today, and increasingly so as they tackle the challenges of a competitive global marketplace.
While Strategic Sourcing is best known for its cost savings, there is far more to it than that. Strategic Sourcing offers a framework for improving supply chain management, building better supplier relationships, and ensuring that companies receive the best quality goods and services at the optimal price.
Done right, Strategic Sourcing can lead to a lower total cost of ownership, supply chain resilience, supplier innovation, and improved contracts.
One way to start implementing Strategic Sourcing is to identify the products and services that are sourced throughout the organization, and then rank them according to their strategic importance. The highest-ranked products and services are typically those that are critical to the business, have high spend, or offer significant savings potential.
Next, it’s essential to identify potential suppliers that can provide the required goods or services. Research is essential here, and it’s important to find suppliers with the right capabilities, experience in your industry, and a proven track record of delivering excellent quality.
Once the potential suppliers have been identified, they can be evaluated through a formal Request for Proposal RFP process. This process involves sending the supplier a detailed request for information about their capabilities, pricing, delivery times, and more, to ensure that they can provide the services or products required.
The RFP process enables a thorough comparison of suppliers’ offers, allowing businesses to choose the one most advantageous to them.
One crucial aspect of Strategic Sourcing is the emphasis on supplier relationship management. Once a supplier is chosen, it’s important to build a strong relationship based on mutual trust and collaboration. A strong supplier relationship can result in lower costs, heightened quality, and more timely delivery of products and services.
Strategic Sourcing can also be beneficial in achieving supply chain resilience. By working with multiple suppliers, companies can protect themselves against supply chain disruptions and reduce risk exposure.
Another aspect of Strategic Sourcing is Contract Management. Once a supplier has been chosen, the contract serves as the framework for the supplier relationship. With well-defined contract terms, businesses can establish clear expectations and performance metrics, which can aid in supplier evaluation and help predict future performance.
Strategic Sourcing can help companies achieve a lower total cost of ownership by optimizing supplier contracts. By focusing on total cost, rather than just unit price, businesses can identify areas where cost savings can be achieved while maintaining quality.
Strategic Sourcing is an important part of supply chain management for today’s businesses, and offers many benefits beyond just cost savings. By choosing the right suppliers, building strong relationships, and managing contracts effectively, businesses can reduce risk exposure, improve quality, and drive greater efficiency in their supply chains.
