How Can a Cost-effective Strategic Sourcing Process Benefit Companies?
Even now, many companies consider purchasing to be simple and merely a means to an end. The key aim of any procurement team is to meet the financial requirements while minimizing costs for their organization. Most teams, therefore, pitch competing suppliers against one another to cut purchasing costs. This hardly gives companies any scope to [...]READ MORE >>
Even now, many companies consider purchasing to be simple and merely a means to an end. The key aim of any procurement team is to meet the financial requirements while minimizing costs for their organization. Most teams, therefore, pitch competing suppliers against one another to cut purchasing costs. This hardly gives companies any scope to formulate an effective procurement strategy and build goodwill among suppliers. As a result, companies find it challenging to implement a strategic sourcing process and improve their overall purchasing efficiency. Following this traditional purchasing approach results in a lack of visibility, missed opportunities, and cost synergies for businesses. The absence of a strategic sourcing process also hampers the quality of products and negatively impacts the decision-making process.
At SpendEdge, we understand the impact that following a cost-effective strategic sourcing process can have on your business. And to help sustain profitability, our team of experts has highlighted some of the key benefits of following a strategic sourcing process. Though knowing more about the key benefits of a strategic sourcing process can help businesses achieve significant cost-savings, let’s first understand why companies need it and the impact it can have on your business.
What is strategic sourcing and why is it important?
Strategic sourcing is a systematic approach that is used by organizations to optimize their supply base and improve the overall value proposition. It is a key aspect of supply chain management and involves evaluation of purchases, negotiation with suppliers, and periodic analysis of supply transactions.
Developing long-term partnerships with suitable suppliers helps companies to obtain quality products and services at reduced costs. Strategic purchasing also aids companies in improving service quality in the long term.
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Benefits of strategic sourcing process
Improve the value-to-price relationship
Setting up a strategic sourcing process is beneficial for both buyers and suppliers. For buyers, it helps in negotiating lower prices for purchases that are high volume; thus, maintaining the competitive pricing for their products. For suppliers, the ability to sell huge volumes of products to a single supplier provides them with visibility over long-term cash flows.
Implement multi‐year contracts
Implementing multi‐year contracts with standardized terms and conditions across the organization is a crucial advantage of the strategic sourcing process. It helps companies to protect investments by increasing the contribution that networks make to their business. Keeping the network updated aids businesses in implementing new applications that can significantly reduce costs, enhance customer service, decrease the delivery times, and escalate business growth.
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Ensure supply stability
A strategic sourcing process helps companies to improve their relationships with suppliers. Strengthening relationships with suppliers enables businesses to work in tandem with customers and suppliers, implement strategic purchasing plans, and analyze shortcomings in the sourcing and procurement process. Not only this, a strategic sourcing process can improve vendor management and enable companies to implement a procurement strategy that is beneficial for their business.
Are you planning to set up a cost-effective strategic sourcing process? Request a FREE demo below and know how our sourcing and procurement experts can help you.