Tag: strategic sourcing

strategic sourcing

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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