All you need to know about strategic sourcing

Strategic sourcing, the first step in the supply chain, is the process of procuring goods or services through continually improving and re-evaluating businesses' buying activities. This approach focuses on overall value to your business rather than lowest cost and includes all activities in the procurement cycle. The overall result is to minimise risk to the supply chain, deliver costs savings and increase value.

Stages of strategic sourcing

Strategic sourcing requires the analysis of data gathered throughout the procurement process, such as the goods or services bought, the volume, supplier and price. The cost of the entire lifecycle of the product or service is considered, rather than just the purchase price. There are seven stages of strategic sourcing.

Outline the spend category

Including users, their location, quantity used, processes and supply chain participants.

Market analysis

Using supply market intelligence, you should analyse prices, cost components, labour costs, risks and opportunities.

Develop your strategy

Using your business aims and objectives, your strategy should minimise both costs and risks.

Request information from potential suppliers

Using a Request for Quotation (RFQ) that includes product or service specifications, how often you’ll order, service delivery requirements, judging criteria, expected price bracket, financial and legal terms.

Agree valid bids, negotiate and select your supplier

Choose your shortlist, negotiate terms and select your supplier using your approval process.

Start the implementation process

Ensuring you integrate improvements and agree any changes to the service requirements or delivery of the product or services.

Monitor the results

Using agreed performance metrics and KPIs, monitor performance, identify improvements that need to be made and implement them. Then, you return to stage one and restart the strategic sourcing process.

Best practices for strategic sourcing

As strategic sourcing is data-heavy, having a single data source for all your procurement activity is important. Strategic sourcing software covers the entire procurement lifecycle, including pipeline management, tendering, contract and supplier management. It allows you to automate many tasks, reduces the possibility of errors occurring, and identify and mitigate supply-side risk. Crucially, it tracks spend and savings and produces reports to help you make informed purchasing decisions.

Ultimately, using software to support your strategic sourcing, your company can increase value and cut costs. You can look at the bigger picture, analyse and understand your spend across categories, reduce the time you spend on tendering and manage contracts and suppliers.

If you’d like to learn more about strategic sourcing software, download a brochure or contact us today to set up a free system demo.              

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