The Main Objectives of a Strategic Sourcing Process
There are many reasons why a company should devise and implement a strategic sourcing plan, the most important of which is to generate substantial savings. Other reasons for using a strategic sourcing process include minimizing risks, improving the acquisition process and enhancing supplier performance.
Probably the most important aspect to consider in devising a sound sourcing plan is to approach it as an ongoing and constantly developing process. An accurate measurement of the results of interacting with potential suppliers will give you the starting point in adapting the sourcing plan to the given conditions. The market can be very complex and its conditions can fluctuate a great deal. It would therefore be a mistake not to adjust the strategic sourcing process to the new objectives and goals of your organization, brought by these changes in the market conditions.
When developing a sourcing plan, it is extremely important to be able to clearly identify the basic needs of your company in relation to your business partners. You can make your choice of suppliers based on their ability to meet these minimum requirements of your organization. In addition to this, when implementing a strategic sourcing process, you should also include the maximum expectations of your company. These will not function as criteria in the process of identifying the most suitable supplier for your specific needs and requirements, but they will certainly add value to your company and motivate the suppliers towards a fruitful collaboration. Keep in mind that a win-win scenario will bring the most benefits to your business. In other words, the sourcing plan should also bring its share of benefits for the supplier as well. Therefore, supplier concerns must also be addressed in order to motivate them and set the basis of a productive long-term partnership.
The strategic sourcing process should define all the key spend categories of a company, as well as its business strategies, including commodity, supplier selection, supplier performance and relations, quality and delivery issues, the competitors’ sourcing methods, global supply market conditions, potential for total cost improvements, inventory, cycle time reduction, contractual arrangements, substitution and commodity innovations, ordering and payment processes, as well as the expected requirements for the spend category. An effective sourcing plan needs to include a series of procedures, responsibilities and items that can only be developed upon thorough analysis of the strategies listed above.
A strategic sourcing process can be completed by following several fundamental steps, such as defining the category and commodities in it, performing a supply market analysis, developing a sound strategy on how to minimize costs and risks, using a Request for Proposal process for soliciting bids, conducting multiple rounds of negotiations and making the final selection out of a short list, implementing and integrating the successful suppliers and, last but not least, benchmarking the status of the category or commodity and monitoring the results in order to ensure that full value is achieved.
Remember that the main feature of today’s marketplace is constant evolution. Under these circumstances, no matter how efficient your sourcing plan might be, the strategy needs to be revisited and adjusted constantly and the process has to be restarted upon revision of the supply market.