We're sure you had an elementary school teacher tell you, "never define a word by using the same word in the definition." We'll, we're going to break that rule. Or, at least bend it, when sharing our view of "strategic sourcing."
Strategic sourcing means having a foundational strategy behind your sourcing efforts. There, we did it. Phew. Felt kind of good to break the rules.
So what does that mean in practice?
Well, it can mean a whole lot. Strategic sourcing is the overarching strategy a company chooses to employ, relative to sourcing, purchasing, and supply chain, that is continuously managed to increase its overall value proposition. When you have an underlying strategy behind your sourcing efforts, you optimize information so that your organization can consolidate and leverage spend, choose and partner with the best vendors, all in an effort to make the best decisions it can in the marketplace. This practice requires a constant analysis of what an organization buys, where and from whom, at what total cost, and at what volume. It places emphasis on examining the entire life-cycle of a product, not just its initial purchase price.
Strategic sourcing incorporates customer needs, organizational goals, company culture and philosophy, department bandwidth, and market conditions. What's your strategy for spend management, and how do you award those contracts? How does your approach differ from spends you actively manage than spends that go unmanaged? When an organization takes a strategic methodology to sourcing, they employ a collaborative and fact-based approach that facilitates acquiring optimal products and services for the best value. From our standpoint, the main stages of strategic sourcing are:
1Ensure your department goals and philosophies are aligned with your company's
2Expand your professional network and research the market
3Analyze the data and identify your needs
4Communicate with potential and existing suppliers
5Negotiate and award contracts
6Monitor performance and continuously improve
This evaluation creates a state of optimization that helps sourcing professionals simultaneously gauge a limitless amount of different procurement inputs. It takes the global market, specific current supply chain conditions, and individual supplier conditions, all into consideration, while offering alternatives to address the buyer's sourcing goals.
Why is Strategic Sourcing crucial to your business?
Many popular strategies have grown obsolete for modern procurement. It is now essential to make a shift from being solely a "buyer," to becoming the "architect" of your supplier relationship management in order to handle the dynamic and complex challenges of today. Procurement organizations are taking a more collaborative approach and no longer consider their suppliers merely a representation of a price for a material. Strategic sourcing helps companies join forces with supplier partners who can help them grow their business while weeding out those who have held them back or are not philosophically aligned. As a result, these businesses operate more smoothly, deliver finished products quicker, and are on track to keep advancing within their industries for years to come.
A lot of companies may be good at negotiating on price, but this myopic approach completely neglects the true total value vendor partners might be able to deliver to your organization. Strategic sourcing incorporates Total Cost of Ownership (TCO) as well as the impact procurement decisions have throughout the life of the product. This takes into consideration how the purchasing choices you make are affecting your customers and the overall goals of your organization. By pursuing suppliers based on facts that came from analysis and market intelligence — rather than just convenience, proximity or prior awareness — you'll be pointed to suppliers who would best serve your needs.
Through constant engagement with your suppliers and having proper metrics in place, you can work together to ensure expectations are met and even exceeded. The partnership that is formed through strategic sourcing will grow over time and the value of having an active relationship will pay dividends. If you're not using the best supplier option or solution available on a critical component, you could cause catastrophic damage to your brand. Successful strategic sourcing can actually allow your firm to reduce costs while still improving the quality of your products.
As the premier Group Purchasing Organization (GPO) in manufacturing, Prime Advantage helps companies strategically source from top to bottom. Here are some of our core competencies in this realm that have helped our Members beef up their purchasing prowess and elevate their businesses:
Through the power of group leverage and access to our negotiated savings programs with Endorsed Suppliers, you can enjoy significant savings in raw materials, components, services, supplies, and healthcare.
Prime Advantage's network, professional community, and Conferences provide the relationships and industry expertise you need to compete in the ever-changing business world.
Endorsed Suppliers are audited to gain access into the group and maintain performance states to stay in the group. Access to these Suppliers across such a broad spectrum of categories adds quality, depth, and solutions to your supply chain so that you're covered when the unanticipated occurs.
Our GPO is the only one of its kind. Our offerings, Endorsed Suppliers, and solutions can help support and elevate your entire operation.
We are constantly adding new resources and innovative Endorsed Suppliers, as well as working with the current base to generate the best relationships for our Members.
Our Conferences, and daily access to decision makers looking to develop mutually beneficial and long-term relationships make our group second to none.
When it comes to sourcing, sure you may be getting the job done, but are there areas that you can further enhance or develop? Prime Advantage doesn't offer suppliers or solutions that just meet requirements and are only "good enough." We strive for true partnerships and resources that can help take you to performance and end products that smash your goals.