As a tenet of Supply Chain Management, Strategic Sourcing represents a shift from buying tactically, on an as-needed basis, to buying collaboratively, with well-planned service acquisitions that consider spending trends and future requirements of the entire enterprise. Reprint: R0502J As globalization changes the basis of competition, sourcing is moving from the periphery of corporate functions to the core . You may also drop a hint that those who dont want to work with you may see some of their orders being diverted to those who are more agreeable. Direct procurement is when companies obtain parts or materials that go into their end products (usually manufactured). Understanding the advantages of strategic sourcing brings us to designing a process to implement strategic sourcing in an organization. empowers organizations to streamline theRFP processso they can focus on selecting the right supplier and forming mutually beneficial relationships. By submitting this data, I acknowledge that I have read the Privacy Policy of Zycus and consent to the processing of my personal data in accordance with the terms of the Privacy Policy. What is Strategic Sourcing? - Definition & Process | Study.com Then, they gather data, explore stakeholder needs, research the current market and eventually issue a detailed request for proposal (RFP) to evaluate and select the ideal vendor. Understanding The Famous 7 Step Strategic Sourcing Process Luckily, your RFP template provides a foundation to build upon. It also involves analyzing the organization's current and future spending habits. Indeed, staying in sync with your providers will help you identify trends, anticipate market changes and collaborate to find creative ways to improve efficiency. For example, for a CRM procurement project, stakeholders from sales, marketing and operations would contribute to the project. The submitted information will provide insightful datathe pricing structure, delivery and warranty provisions, product service specifications etc. Sales proposals are an essential part of the sales process. When you identify the best vendor fit, begin negotiations and contracting. The best relationships begin with a solid foundation. Reporting and tracking results. Who are the vendors primary suppliers? Complete the form and we'll be in touch soon to schedule time with you. For example, several questions in the capabilities section may each be worth five points while a question about must-have functionality is worth 20 points. Finally, its time to engage your stakeholders again to help score the more nuanced responses. If private, who are the current investors? RFI invites vendors to offer suggestions and creative solutions to a problem. Procurement and strategic sourcing are related, but different endeavors. Understanding Strategic Sourcing. It involves connecting data, spend analysis, market research, negotiation, and contracting to achieve maximum business performance. Request a copy of the companys corporate and employee policies. The process takes into account not only your organizations needs, but the suppliers unique capabilities and diverse competitive motivations. The second step includes building a strategy on how each categorized spend area will be approached. A centralized procurement team can guide you to focus strategically on how your organization is spending money and offer solutions to reprioritize spend where needed. (PDF) Strategic Sourcing - ResearchGate Ask yourself: do the potential vendors offer a cost savings that offsets the investment required to find a new solution? The requirements and challenges of the future will be faced within an enduring fiscally constrained environment. At the completion of this course you will have the tools and . If you subscribed, you get a 7-day free trial during which you can cancel at no penalty. Strategic sourcing is a growing practice that embraces spend analysis, data-driven supplier selection and ongoing engagement with vendor partners. Once youve received your RFP responses, its time to score your proposals. This involves identifying the requirements of the business units that necessitate spending and defining goals, objectives, and corresponding timelines to fulfill the requirements. Access to lectures and assignments depends on your type of enrollment. Strategic sourcing is the process of developing channels of supply at the lowest total cost, not just the lowest purchase price. Learn More: Four Pillars of Strategic Sourcing. Ultimately, this approach achieves the overall goal of strategic sourcing to reduce costs while improving the efficiency and reliability of the supply chain. : domestic international spend, direct indirect spend). Can the vendor keep up if your business grows? 7 KEY DIFFERENCES - STRATEGIC SOURCING VS. PURCHASING - LinkedIn An ideal vendor can fulfill not only todays necessities, but tomorrows as well. They build strategic partnerships and leverage the supply chain to extract value and create a competitive advantage. This expedites business performance, reduces excessive spend due to supply chain failures, and helps organizations cope with various external and internal environmental disruptions. Strategic sourcing involves developing a proactive, holistic, and continuous evaluation and re-evaluation of the sourcing activities in an organization. After the selection criteria are identified, the fifth step is to choose the suppliers that can offer the highest level of cost savings along with delivering quality. Can you invest time in an existing vendor relationship to avoid undertaking a new strategic sourcing project? Automaton of strategic sourcing activities helps identify and categorize the various spend categories that exist in an organization across business units. You probably hear the term partner a lot when vendors approach you. When done well, it makes the entire procurement process run smoothly. Then, you determine what strategy approach better fits with the type of service you're sourcing. Ask what is working well in the partnership? No business can achieve their big-picture goals alone which is why organizations count on strategic sourcing practices to form beneficial partnerships. So how do you achieve true strategic sourcing? If required, other categorization criteria that better suit the business requirements can also be developed (e.g. To understand the value of strategic sourcing, think about the difference between a transaction and a relationship. Cardinal provides the Strategic Sourcing (SS) Buyer with a means to create, manage, and award Strategic Sourcing Events. Gain insight into a topic and learn the fundamentals. It is important to engage in periodic tracking of supplier performance and identify areas for improvement. For many, the answer is strategic sourcing. Furthermore, you also must understand what youre trying to achieve. These are all excellent goals when youre seeking new strategic suppliers. 7. Is there a trial period for the engagement? The process of strategic sourcing doesnt end at choosing a supplier. Generate reports for more insight and follow the entire project in dashboards. The software procurement process has come a long way since software was mailed on CDs. Communication is at the heart of strategic sourcing. is a straightforward request for pricing and payment terms. Article Content - DAU Does the organization support social responsibility and charitable giving? A partnership takes two. Strategic sourcing is here to stayit delivers cost savings without compromising on quality. Uncover client requirements to better inform RFPs you issue on their behalf. Staying abreast of the latest developments enables you to have a backup plan if your vendor fails to meet your needs. When you enroll in the course, you get access to all of the courses in the Specialization, and you earn a certificate when you complete the work. Finally, almost every strategic sourcing project will require executive review and approval. To be successful as you serve your customers beating your competitors and solidifying ROI you dont need a transactional vendor. Strategic sourcing processes build the foundation for a productive vendor relationship. If fin aid or scholarship is available for your learning program selection, youll find a link to apply on the description page. Understanding sourcing best practices will help you achieve ideal outcomes from your RFP. Indeed, youll find that creating a strategic sourcing RFP is more detailed and complex than routine RFPs. Weighted scoring assigns each question a point value based on its importance to the business, often a scale from one to five. Strategic Sourcing Process - Basware Could they leverage efficiencies to trim your timeline? Has the company been involved in a merger, acquisition or reorganization in the last few years? Strategic sourcing happens at the very beginning of procurement. This tactical, traditional approach is widely practiced. Strategic sourcing is an approach to procurement that weighs the overall value delivered through a vendor relationship rather than the simple cost of the product or service provided by a vendor. Once youve scored your proposals, made your comparisons and called customer references, hopefully you have a clear winner. The basic mission of universities is to carry out research and provide education based on it. Productive partnerships take work and planning, which is why strategic sourcing is so important. Zycusrecognizedas a Strong Performer in The ForresterWaveTM:Contract Lifecycle Management, Q2 2023 Download Report. I can learn whenever it fits my schedule and mood. Strategic Sourcing: A Big-Picture Approach to Procurement - G2 During this step, its important to define and put in writing your expectations, strategy for meeting goals and metrics for evaluating performance. Expand your knowledge. You probably hear the term partner a lot when vendors approach you. We are in the midst of . Summary. Dont overlook your organizations strategic plan. This will help you keep tabs on their work and make sure theyre fulfilling their end of the agreement. Furthermore, issues like economic and political volatility, technological disruption, etc. Can you talk directly with a customer that has a similar use case to you? Aligning the sourcing activities of a business to its organizational goals and objectives is at the crux of strategic sourcing. A little proactive communication goes a long way, and carries lots of weight in maintaining a healthy and productive vendor partnership. Understand how our focused security efforts keep your system and data safe. Strategic sourcing aims to achieve the lowest Total Cost of Ownership (TCO) along with minimal supply chain risk. Organizations using eSourcing software enables end-users to source their own suppliers within the bounds of necessary procurement and compliance rules. The end-users of an organization can easily use eSourcing tools to gather competitive pricing from available suppliers vis--vis e-tendering and select the right ones. Organizations are adopting strategic sourcing to establish a holistic approach to manage their sourcing requirements and to build a more proactive approach to the various supply chain disruptions. When is strategic sourcing a good option? There are two main types: direct procurement and indirect procurement. Can they elevate quality while saving costs? Strategic Sourcing is the process of determining an organization's spend profile and supplier base to ensure that the organization's procurement needs are met effectively and profitably. . Add this credential to your LinkedIn profile, resume, or CV, Share it on social media and in your performance review, A excellent course and honest feedback ! Its a win-win.. 1 Strategic Sourcing & Category Management: The Basics Ms. Heidi Bullock, SES Director of Contracting HQ AFMC 1 2017 DoD Small Business Training Week | April 3-7, 2017 | #SBTW17 Agenda Strategic Sourcing 101 Strategic Sourcing SB Successes Category Management 101 Current AF Category Management Status What s Next 2 Strategic Sourcing 101 3 OFPP Strategic Sourcing Strategic Sourcing (OFPP) A . Each member of your strategic sourcing team brings something unique to the table, and youll need all of their perspectives and areas of expertise to make the right decision. They may be under the impression that you are the reluctant one. Indeed, many organizations have recently created strategic sourcing manager roles to encourage specialization in this area. Sourcing is an important part of managing a successful supply chain. Procurement has always been focused on controlling costs and improving company profitability.