Strategic Sourcing: Is It A Comprehensive Procurement Approach?

Finding the proper vendors for sourcing purpose has risen to the top of procurement teams’ priorities as companies put more emphasis on controlling expenses.

Strategic sourcing is therefore changing how organisations think about buyer-supplier relationships since it focuses on increasing value and lowering risk through vendor collaborations.

In answer to the question that “Does strategic sourcing is  the comprehensive procurement approach?”

It is a “yes” strategic sourcing is crossing the the boudary of traditional procurement. The discipline of strategic sourcing, which includes expenditure analysis, data-driven supplier selection, and continuing interaction with vendor partners, is expanding.

Why Is Strategic Sourcing Gaining Prominence In Procurement?

The strategy, which was initially embraced by big businesses to measure and boost vendor return on investment (ROI), is now commonplace among businesses of all sizes.

Businesses of all sizes are now able to gather and compare a wide range of competitive data.

Even though the thorough approach of strategic sourcing contributes significantly to its value, it is challenging to pinpoint a single aspect that directly causes procurement savings.

Organizations who use strategic sourcing, however, note a number of advantages.

Strategic Sourcing Principles For Supply Chain 

1. Making choices based on overall value

2. Relationships between partners are preferable to transactions

3. Takes into account overall cost of ownership

4. Ranks the most crucial components of a vendor’s offer in priority

5. Demonstrates the importance of the purchasing department of sourcing procurement.

When Is This A Good Option? 

Strategic sourcing clearly has advantages, but not every procurement project is a good fit for it. After all, the procedure is undoubtedly difficult and oftentimes time-consuming. Simply put, some tasks don’t need that much specificity.

Therefore, it’s crucial to strike a balance between the cost of the item being purchased and the time commitment needed to carry out a strategic sourcing operation.

  1. Projects that match well with strategic sourcing are:
  2. High value, well defined, and crucial to the business
  3. Intricate and specialized
  4. Having high stakes and involving organizational transformation

Examples of Related circumstances: 

  1. Choosing a new customer relationship management program
  2. Assessing the value of financial services or employee perks
  3. Hiring a design studio for a new building project

Scenarios That Are Better Suited To Alternative Procurement Approaches

There are some circumstances that just won’t be a suitable fit for the procedure due to the detail and time needed for strategic sourcing.

  1. Finding a project management solution for a single department is an example of a low value, low risk procurement.
  2. When there is a strong preference for a specific provider, collecting bids to satisfy policy criteria
  3. Try an RFP light for a normal, transactional purchase of office supplies.
  4. Consider making a request for information while gathering information, determining costs, and arranging a future purchase (RFI)
  5. Try a request for credentials to find the ideal expert to consult on a marketing effort (RFQ)
  6. Obtaining the best deal on a simple buy — Take into account a request for quotations (RFQ)

How to Make the Change to Strategic Sourcing

You will walk through the strategic sourcing cycle, starting with expenditure analysis, supplier selection, and continuous engagement, as you find purchases or existing vendor relationships that are a suitable fit for the strategy.

  1. Cost analysis
  2. Describe how you are right now.
  3. Decide on requirements and objectives.
  4. Investigate options
  5. supplier choice
  6. Competencies and the customer landscape
Use Strategic Sourcing To Your Advantage

In the end, strategic sourcing is the procedure of gathering information, working with the finest vendors, and assuring continued value and efficiency in procurement. It looks beyond simple, transactional purchases and concentrates on the larger picture, or how to aid in the accomplishment of the organization’s objectives.

The intricacies of strategic sourcing will unavoidably vary from one firm to another. Fortunately, you may begin your strategic sourcing efforts with a single project.