Importance of Strategic Sourcing in Procurement Outsourcing

Strategic sourcing is a procurement process that continuously evaluates and values ​​a company’s purchasing activities. It is considered part of supply chain management where the goal is to minimize supply chain costs while leaving the chain intact.

Strategic Sourcing is a systematic process focused on obtaining the maximum advantage of cost, process, quality and technology, taking advantage of the purchasing power of the company. It is an organized and collaborative approach to reduce costs while maintaining or improving service and quality. In contrast to traditional sourcing, strategic sourcing involves an ongoing relationship between buyers and suppliers that is a mutually beneficial collaboration. It also increases visibility across the supply chain through true collaboration.

Strategic sourcing has many advantages, including cost savings, standardized pricing, access to new suppliers and vendors, increased operational efficiency, established purchasing procedures, and a relatively shorter cycle time. Strategic sourcing savings can come in a variety of ways, including expense consolidation, demand management, process improvement, competitive bidding, LCCS, restructuring, and developing supplier relationships.

Strategic sourcing begins with evaluating a company’s spend, looking at the supply market, analyzing cost, identifying the right vendors and suppliers to develop a new sourcing strategy, negotiating with suppliers, implementing the new supply structure and tracking the results. This process is cyclical and many companies adopt it as part of the overall sourcing strategy.

For successful strategic sourcing, a company needs to understand and identify the most impactful cost reduction opportunities. A thorough review of expenditures and collection of expenditure data is necessary. After that, a savings estimate is made for the project. Therefore, a spending assessment is the first step in looking at a company’s needs, its buying power, and the degree to which it is harnessing that power. An effective sourcing methodology should be adopted as the next step. This will address things like product specification and thus use the most ideal sourcing and negotiation strategy for the product category to achieve the lowest cost.

The next step in the process is a process for supplier participation and contracting processes. This can be done through the use of electronic contracting and technological tools that greatly help the process and increase efficiency. After that, the profile of the selected provider and a strategy followed by the implementation methodology are developed. Then, all this process, strategy and methodology is integrated with the operations and is followed up on a regular basis.

Strategic sourcing is used to strengthen a company’s competitive advantage. It is itself a touchstone in outsourcing. It is to obtain the best services and products at the best price. What sets him apart is his focus on constantly improving and evaluating a company’s purchasing activities and his flexibility in process improvements.