Wednesday, September 24, 2014
A blog post by Preeti Havaldar
By definition, Strategic Sourcing is an organized and collaborative approach for optimizing an organization’s supply chain and improving the overall value by reducing costs and delivery cycle times and improving quality.
The objectives of strategic sourcing are:
· Reduce costs
· Improve quality of service
· Identify areas of improvement
· Examine supplier relationships across the organization
· Develop and implement contracts with standardized terms and conditions
· Leverage entire organization’s spend
Following are the steps involved in the strategic sourcing process:
Defining supply chain goals is a crucial part of the strategic sourcing process. A clear vision helps direct the company’s cash flow in the right path. Identifying capacity of the current processes and scope for improvement is the next most important step in the process. It helps to identify the most utilized or bottleneck processes in the system and develop strategies to improve their performance. The company should also classify their processes as value-adding and non value-adding and offload the non value-adding activities from the critical path to help enhance overall performance. This is the point where outsourcing becomes an advantage. Developing effective outsourcing strategies can help boost the overall performance.
A common misstep when designing strategic sourcing is that organizations limit strategic sourcing to the objective of cutting costs. In a broader sense, strategic sourcing can impact the financials of the company by improving the procurement processes. A good strategic sourcing strategy should take advantage of information systems, supply chain management tools, e-procurement strategies and supplier networks.
When implemented in an efficient manner, strategic sourcing can lead to competitive advantage of supply chains by lowering costs, minimizing complexity for end users, optimizing supplier relationships and improving quality.
Inspite of the great advantages of strategic sourcing, does the primary driver still remains "cost-cutting" ?