Defining what is strategic sourcing and why is it important?
Strategic sourcing is the process of understanding suppliers’ capabilities, organizations’ goals and needs, and market developments and costs, and utilizing this data to optimize operations, reduce costs, and achieve significant targets. Analyzing every tenet of the procurement, sourcing, and supply chain processes have become increasingly crucial to growth and success. It enables a wide-spread and comprehensive view towards sourcing, supply, and procurement. Adopting strategic sourcing helps companies achieve the lowest possible costs, minimize risks to their supply chain, and enable congruence between sourcing plans and major business strategies. Sourcing has become an all-encompassing process that reduces costs, increases profitability, mitigates risks, and improves supplier relationships. With efficiency and higher profitability, your company will receive more, and suppliers will gain more, leading to stronger partnerships and higher value creation. Leveraging strategic sourcing and utilizing certain best practices can enable better visibility into pricing and forecasting, establish efficiency across the supplying and sourcing processes, and improve supplier selection by allowing data-driven decisions and well-informed plans.
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Key steps to apply strategic sourcing and gain competitive edge
Capitalize on Technological Tools: Utilizing technology and software can help companies tackle complex data, market factors, and tasks with accuracy. To ensure efficiency and effectiveness, choose software and technology according to your organization’s needs. A common error many organizations make is choosing and employing technologies, molding strategies, and formulating processes as per the software and technology acquired. This error can lead to unnecessary expenses and hamper efforts to address specific problems. With the right technologies and strategies, your company can analyze huge amounts of spend, increase efficiency and workflow, and enable well-informed business decisions.
Develop Alliances with your Suppliers: To maintain sustainable and stable growth, it is important to work closely with suppliers beyond creating the contract. This includes open communication across levels, transparency with costs and purchases, and setting similar objectives. Many companies employ supplier relationship management to ensure the creation and fostering of mutually beneficial partnerships with suppliers, encourage two-way communication, improve problem resolution, and ensure performance objectives are achieved. Fostering positive relationships with suppliers can help business strategies and strategic sourcing plans align and make major goals easily achievable.
Engage in Collaborative Strategic Sourcing: While strategic sourcing is commonly considered the responsibility of an organization’s purchasing department, creating a collaborative approach can propel companies forward. For successful supply chain management, collaborating with departments that provide feedback and insights regarding the company’s accounting, finance, operations, maintenance, and quality assurance sectors that contribute to the initiative. This approach helps reduce costs, significantly streamline processes, and increase responsiveness to changing demands.
Track Spend, Savings, and Contracts: Technology and various software have made it significantly easier for companies to track expenditure, savings, purchases, and dealings. The process of tracking spends and savings is imperative to ensure there are no unnecessary expenses, improve savings, and maintain accountability. Additionally, companies often create contracts with suppliers for undetermined periods, which leads to massive losses over the years. As costs and purchases increase, companies should focus on contract management and ensure their supplier contracts are current, relevant, and enable mutually beneficial deals for long-term partnerships.
Developing a robust strategic sourcing pipeline is essential for businesses to gain traction over competitors in the industry. Request for a FREE proposal to discover how you can conceptualize the benefits of strategic sourcing to stay ahead from competition.
Strategic sourcing for a leading oil field equipment supplier in North America
Challenge: The client, a leading player in the oilfield equipment industry wanted to gauge the customer data and make better-informed business decisions with the help of strategic sourcing to drive rapid business growth.
Benefits offered: Helped the client identify growth drivers and offered an accurate picture of how strategic sourcing solutions can benefit them, which enabled them to move towards a new business model.
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SpendEdge shares your passion for driving sourcing and procurement excellence. We act as a global strategic partner for leading Fortune 500 firms and other leading companies across industries. Our strength lies in delivering robust, real-time procurement market intelligence solutions that help sourcing and procurement professionals make informed decisions. Our innovative procurement solutions also help enterprises transform structural capabilities, improve execution efficiency, and fast-track time to savings.
Every business needs smart procurement intelligence to stay at the top of their game; we provide actionable insights utilizing lean methodology to help enterprises make better purchasing decisions. We offer businesses with the precise combination of resources, tools, and techniques to help them redefine sourcing and procurement capabilities. We cover a broad spectrum of industries starting from pharmaceutical and life sciences to transportation with expertise in supply market intelligence, spend analysis and benchmarking supply chain risk assessment, and category management.