Tag: Benefits of Strategic Sourcing

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How Can a Cost-effective Strategic Sourcing Process Benefit Companies?

Strategic sourcing process

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. (more…)

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Ask Me Anything: 3 Steps to Establish an Excellent Strategic Sourcing Methodology

In the 21st century, for any company to become a world-class procurement organization, it needs four competencies that will allow it to transfer value through an effective strategic sourcing methodology to the entire supply chain. These four competencies include:

  • Anticipate and meet future demand
  • Focus on customer-driven environment
  • Manage information flow throughout the supply chain
  • Manage goods demand and supply

Many organizations face challenges when it comes to establishing an effective strategic sourcing methodology and are, therefore, unable to boost their performance. An excellent strategic sourcing methodology is one where organizations start looking for quantum savings from their supply chain.  It is characterized by the exchange of real-time data between suppliers and buyers, long-term contracts, and purchasing through multi-functional communication. Many different models exist for building a good strategic sourcing methodology. However, every company that has executed this business philosophy shares certain basic components with their own execution. Generally, this methodology is implemented with the objective of applying purchasing savings to some other aspect of the business. Thus, it is very crucial tContact USo establish a proper sourcing methodology for any organization if it wants to excel in procurement. We, at SpendEdge, have listed out a few essential steps to establish an excellent strategic sourcing methodology.

Steps in a Strategic Sourcing Methodology

Define goals

The first step to an excellent strategic sourcing methodology is to define the goals and objectives of the organization. Identifying the scope and objectives of the program and internal requirements for strategic sourcing is very essential. It helps in determining where and how to spend.  

Analyze internal spending         

The next step involves tracking and analyzing internal spending. This can be accomplished by gathering data from ongoing procurement and accounting systems or by implementing e-procurement throughout the organization. This is the step where identification of new potential vendors is done, new RFI templates are desirequest proposalgned, and the team analyzes the effect of existing long-term agreements.

Develop commodity strategies

The third step involves the development of commodity strategies using certain parameters like volume concentration, best price evaluation, product specification improvement, relationship restructuring, joint process improvement, and global sourcing. This is the point where an e-procurement system or other robust acquisition tool becomes a part of the overall product sourcing process.

Benefits of Strategic Sourcing Methodology

  • Encourages constructive competition
  • Supply risk management
  • Controls procurement costs
  • Maximizes ROI
  • Streamlines procurement operations
  • Helps build strong and trustworthy relationships with existing and new vendors
  • Gain a competitive advantage

 

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Cosmetic Products Strategic Sourcing: A SpendEdge Case Study

Cosmetic products brands not pursuing innovation in their supply chain and making use of the strategic sourcing best practices are facing lower revenues globally and paving way for new players to capture market share. Click To Tweet

Today, cosmetic products brands are generally shifting away from big-spend traditional media campaigns and toward smaller, but more varied and more dynamic digital or multi-channel communication. Such a communication is often two-way, involving direct and semi-direct interaction with customers, fostering closer relationships, request proposal allowing data collection and, as a result, advanced behavioral segmentation and personalized promotional campaigns. However, with the rise of digital media, more particularly social media, comes a challenge of catering to the increasingly product-educated customers in a context in which other consumers’ opinions and social networks are increasingly integrated into the decision process.

Business Issues

  • The client: One of the leading cosmetic products brands in the US
  • Area of Engagement: Strategic sourcing

The client – is a leading American fortune 500 global retailer specializing in cosmetic products including bath, beauty, fragrance, and candles. The company is headquartered in Ohio, U.S. One of the core objectives of the client was to reduce the cost of goods associated with corrugated box supplies. The client also wanted to standardize and reduce SKUs for select items and incorporate strategic sourcing best practices across 11 plants and distribution centers in nine countries across the globe. Faced with this challenge, SpendEdge was engaged to coordinate procurement efforts in different countries, including rationalizing SKUs and consolidating suppliers.


Benefits of Strategic Sourcing Best Practices

Strategic sourcing is the foundation for deep change within a supply chain that leads to better financial gains. With all the obligatory tasks facing an organization, improving procurement and adopting strategic sourcing best practices is the effective way to work toward better business.request proposal Additionally, strategic sourcing is an approach to robust product procurement that continuously re-assesses and evaluates a company’s purchasing behavior to increase the overall profitability.


Key questions answered in our strategic sourcing engagement

To gain in-depth insights into our strategic sourcing solutions

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Client Journey

The strategic sourcing experts at SpendEdge tailored a comprehensive research approach which included qualitative and quantitative data collection procedures coupled with primary and secondary research methodologies to help the client gain better visibility into their sourcing and procurement processes and identify the major areas of spends. The experts also amassed information from various proprietary sources to further help the cosmetic products manufacturer reduce the cost of goods associated with corrugated box supplies.

The Solution Benefits and the Business Impact

With the help of SpendEdge’s strategic sourcing best practices engagement, the cosmetic products manufacturer developed detailed supplier evaluation criteria and pricing worksheets to make the supplier selection most effective. Additionally, all suppliers, including incumbents, were ranked based on criteria and assigned weights to create the auction shortlist. Final supplier selection recommendation was made based on qualitative assessment scores, geographic coverage, previous experience with the vendor, quality audit results, request proposal approved samples, and product development and tooling costs. This helped the client identify savings of 35%, compared to their current spend


Cosmetic Products Brands Future

Today, consumers are increasingly conscious of the environment, ethical, and social implications of consumption and production. As a result, individuals expect businesses to share their concerns, which means a company must commit to a responsible use of resources in development and production, across their value chains, which gives rise to a whole new level of innovation across all areas of the cosmetic products industry.


A must-read case study for procurement specialists and decision makers looking to develop an understanding of the cosmetic products brands across the globe

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