Strategic Sourcing Process

Sourcing, also known as procurement, is the practice of finding and choosing companies or people based on criteria that have been set. Sourcing takes place in many distinct fields in company and for various purposes. Supply chain management is one of the most popular uses of sourcing. Businesses can create a competitive advantage by finding the most suitable vendors at the lowest price.

Sourcing is also a recruitment sub-set that proactively searches for a specific position for the most skilled applicants. Outsourcing is a popular method in which companies contract a company function with a third-party provider, typically something uncritical like payroll. Companies will draw up a list of prospective third parties as part of the outsourcing process and choose the most suitable for their requirements.

What is the process of sourcing?

To select the best product or service for a certain category of spending, sourcing is used. The customer operates in cooperation with internal customers or budget holders when choosing vendors through a tender or sourcing method.



Strategic Sourcing Process

Why use a formal strategic sourcing process?

Experience has shown that the strategic procurement method of 7 steps; established in 2001 has stood the test of time and has become a best practice with differences. The primary objective of strategic sourcing is to save money, but other reasons include improving the process of procurement, performing providers, and minimizing danger. Below is a summary of the 7 Step Strategic Sourcing Process and an explanation of each step.

Profile the category

Understand all about the category of spending as the first step in the process of strategic sourcing. This implies that the category and commodities are defined in it. What is the amount, kinds and sizes currently used. Who are the consumers, where they are situated, what procedures are being used and who else is engaged in the supply chain.

Supply market analysis

Identify prospective fresh vendors worldwide and local. Study the product or service price elements and evaluate the marketplace of providers for hazards and possibilities. Key prices of raw materials and other factors such as labor and transport must be calculated and the cost components of the providers must be calculated.

Develop the strategy

How to develop the strategic sourcing approach is to decide where to purchase while minimizing risks and expenses. It's a must to use a cross-functional project team. The approach will rely on what true solutions to present providers are there, how competitive the provider marketplace is, and how accessible the customers to fresh providers are.

Select the sourcing process

The most prevalent technique of procurement is to apply for offers through a Request for Proposal process. It involves specifications for item or service, requirements for shipment and service, breakdown of prices, and legal and economic circumstances. Often the criteria for assessment are also indicated.

Negotiate and select suppliers

After decreasing the offers to the valid ones, the first round of the negotiation process is carried out with many vendors asking for clarifications and more details where necessary. An excellent approach for strategic sourcing is to perform numerous rounds of negotiations in order to reach a brief list. Usually the team makes the final selection and signs off as per the approval process.

Implement and integrate

Notify the successful vendors and guarantee the execution method involves them. Depending on the degree of change, implementation plans differ. The communication plan includes any improvements to specifications or processes, adjustments to delivery or service requirements or pricing in the strategic sourcing approach.

Benchmarking and tracking results

This is a main component in the process of managing sourcing. It is the beginning of a ongoing process, beginning with the benchmarking of the commodity or category's current status, tracking the outcomes and ensuring complete value is accomplished. Return to Step 1 to re-examine the supply market and restart the process in a marketplace in constant evolution.