Strategic Sourcing involves a systematic approach to sourcing by gathering and evaluating information about an organization’s buying requirements (total demand) combined with information about suppliers’ marketplaces as well as individual vendor performance. Unlike in traditional sourcing, the main emphasis in strategic sourcing is on reducing the Total Cost of Ownership (TCO) instead of focusing efforts on purchasing price per item. The strategic sourcing process includes 7 key steps to develop an effective sourcing strategy:
Step 1- Defining the category:
It involves identifying the spend areas across the organization and categorizing them. Also, the pre-requisites about the users, their locations, current quantity available, supply chain logistics are collected.
Step 2- Gather information about the supply market:
Finding the prospective global and local suppliers by analyzing their revenue, market share, etc along with risk analysis.
Step 3- Design the sourcing strategy:
This stage decides from where all the purchasing will be performed keeping in mind the risks and costs associated with it.
Step 4- Finalizing a sourcing process:
Deciding on the sourcing process to be used – RFI, RFP, RFQ, or eAuction
Step 5- Choosing a vendor and negotiating terms:
Selecting a supplier involves many rounds of negotiations with short-listed potential suppliers before finalizing the supplier.
Step 6- Implementation and integration:
Successful vendors should be notified and included in the implementation process.
Step 7- Analyzing results and benchmarking:
The last stage marks the commencement of a continuous cycle that begins with benchmarking the present condition of the commodity or category, monitoring the results, and ensuring that full value is realized.
