Different Stages of Strategic Sourcing

In an ever-competitive business environment, supply chain management professionals are constantly pursuing innovative methods to reduce costs, improve the quality of products, and achieve faster availability of products and services in the market. Strategic sourcing is a facet of general procurement management that can help attain supply chain objectives. It is a product of the rapid digital evolution and technological innovation to conduct a data-driven assessment of a company's purchases.

The multifaceted approach of strategic sourcing helps businesses consolidate their procurement power to achieve a significantly low cost of ownership and minimize risk to the supply chain. It is a continuous process based on constant reevaluation of the organization's survey of the market and sourcing activities. Strategic sourcing also attempts to align organizational objectives and requirements with suppliers and market conditions. The different stages of strategic sourcing involve analysis of the business, developing strategy, identifying suppliers, cultivating relationships with suppliers, and measuring and tracking their performance.

Analyzing business spending is the first stage of the strategic sourcing process. It identifies crucial spending areas throughout the organization and categorizes them into essential or mundane, direct or indirect, and domestic or international spending; this would help businesses perform risk assessments and prioritize the sourcing activities to create a procurement strategy.

After corporate spending is categorized and prioritized, developing a sourcing strategy follows. This stage involves mapping out the corresponding business requirements that demand the spendings, timeline for fulfilling the needs, and effective communication so that all stakeholders can understand the whole process and be on the same page.

The next step is to identify suppliers. Effective procurement managers consistently strive to locate the best quality materials for significantly lower prices from reliable suppliers.

It is essential to consider competitive differentiation opportunities when identifying suppliers. Using suppliers with a good brand image among consumers helps develop a suitable product differentiation opportunity. This could lead customers to prefer a company's products over competitors. The "intel inside" logo on personal computers is a perfect example of this.

Cultivating a positive relationship can help strategic sourcing managers become better at speed to market, meeting cost and quality objectives. A good connection could also allow suppliers to channel and deliver items efficiently to precise buyer specifications. In addition, consumers play a significant part in driving a company's success through their awareness and demand for ethical business practices and corporate social responsibility in today's business climate.

A good relationship with consumer-friendly suppliers could help a company improve its products and brand image through PR and marketing strategies with consumers. A supplier relationship management (SRM) tool can also help maintain cordial relationships between a company and its suppliers. SRM advocates for closer and more collaborative relationships with suppliers to properly uncover and realize new value and reduce the risk of failure.

Strategic sourcing also delves into measuring the performance of suppliers concerning organizational standards. This process deals with monitoring and evaluating supplier's performance periodically to identify areas of improvement and decline. In addition, evaluating the supplier's performance helps identify sourcing risks.