Strategic sourcing delivers significant savings by streamlining the ongoing, long-term procurement of goods and services.
It allows for competitive bidding; ensuring optimal pricing and supplier selection on a wide range of spend categories which results in very large savings when compared to traditional processes.
In the absence of any formalized strategic sourcing programs, organizations typically face some common challenges:
- Strategic sourcing is only applied to a fraction of total spending.
- Many important purchases are made without a structured, competitive process because it is seen by staff as too cumbersome and time consuming.
- When sourcing events are performed, it's hard to involve all the right people to create requirements and evaluate suppliers.
- Considerable procurement manpower is required.
- Sourcing events are inconsistently executed, hard to track, and lacking in transparency.
- There’s no clear picture of the level of supplier risk.
The first step towards preventing savings leakage is to implement a robust spend management program that begins with spend analysis and subsequently evaluates when the use of strategic sourcing tools are appropriate.
These initiatives begin with gathering spend data, determining service level requirements, researching and analyzing suppliers and the market, and issuing requests for information, proposals and quotations as well as eAuctions, where appropriate.
Strategic sourcing initiatives are effectively aimed at reducing or eliminating offline/unorganized methods, localized decision making and non-repeatable processes.
Top-performing organizations exploit the latest technologies to conduct more sourcing events and direct a higher proportion of purchases through formal contracts without the need for doubling overhead, jeopardizing quality or increasing exposure to risk.
These organizations combine best-in-class processes with automation to complete the sourcing cycle, inclusive of RFx automation, supplier identification, bidding/negotiation and optimization tools.
They conduct more sourcing activities with a defined and repeatable methodology in mind, and as a result improve supplier co-ordination.
- Standardize the competitive sourcing process.
- Make it easier for employees to use existing agreements.
- Gain a clear picture of what is being bought and from whom.
- Reduce the amount of labor-intensive manual tasks.
- And ultimately…reduce costs.
Other benefits of strategic sourcing include: improved budget management and cash management, quicker auditing, reduced paper storage costs, and enhanced supplier relationships.
Streamline and standardize your sourcing process to achieve greater value.