What is Strategic Sourcing and why is it Important? Steps in Strategic sourcing with Examples (271)

Strategic Sourcing is a systematic approach for improving the supply base and overall value proposition of an organization.

Strategic Sourcing is a procurement process of developing, improving, and re-evaluating an organization’s purchasing activities

Why is Strategic Sourcing Important?

Higher Degree of Cost Savings

- The process encourages the organization to seek suppliers that will deliver high value at the lowest possible prices so that the cost savings are improved.

Lowers the Risk Involved

- The pre-vetting process checks the financial stability of the supplier and the corporate responsibility of the transaction to minimize the risk in the supply chain.

Business and Sourcing Objectives are Better Aligned

- The concept of Strategic Sourcing is based on alignment between sourcing and organizational goals.

Ideal Suppliers are optimized

- Analysis of the profile and core abilities helps in the optimization of the ideal supplier.

Relationships with Suppliers are built in the Long Run

- Strategic Sourcing builds a long-term relationship with the supplier and gives them their due importance.

Strategic Sourcing Steps

Assessment of Spending

- Assessment of Spending requires the procurement team to collect the purchasing information, analyze and then build the groundwork for the next steps.

Market Research

- Market Research refers to identifying potential global and local suppliers and getting an understanding of the trends in their marketplace.

Find out Costs

- This step is about finding and analyzing the total costs to provide the goods and services

Find Suppliers

- Identify the ideal suppliers through a proper process

Build a Sourcing Strategy

- Choose the right vendor who can help to achieve cost savings and add value to the supply chain. Building an effective sourcing strategy is of utmost importance for an organization.

Negotiate

- Negotiate before finalizing any deal about geographical coverage, payment terms, service levels, price, and products

Make New Supply Chain

- Create a new supply chain that will give the best results

Repeat

- Note down the results and assess the process once again

Strategic Sourcing vs Traditional Sourcing

Traditional Sourcing puts the onus on supplier pricing whereas Strategic Sourcing on supplier pricing, quality, service, innovation, and regulatory compliance.

Examples of Strategic Sourcing

1. IKEA - India
2. IKEA - China
3. Walmart – India
4. McDonald’s

This video is on Strategic Sourcing and it has the following sub-topics.

Time Stamps

0:00 Introduction to Strategic Sourcing
00:20 What is Strategic Sourcing?
00:52 Why is Strategic Sourcing Important?
00:56 Higher Degree of Cost Savings
01:12 Lowers the Risk Involved
01:30 Business and Sourcing Objectives are Better Aligned
01:45 Ideal Suppliers are Optimized
02:01 Relationships with Suppliers are built in the Long Run.
02:20 Strategic Sourcing Steps
02:23 Assessment of Spending
02:32 Market Research
02:40 Find out Costs
02:48 Find Suppliers
02:53 Build a Sourcing Strategy
03:04 Negotiate
03:12 Make New Supply Chain
03:17 Repeat
03:24 Strategic Sourcing vs Traditional Sourcing
03:51 Examples of Strategic Sourcing