Strategic Sourcing is an
organized and collaborative approach to leveraging targeted spend across
locations with select suppliers that are best suited to create knowledge and
value in the customer-supplier interface. We cannot overemphasize the
importance of operating in a collaborative manner.
Over the
past several decades, most in our supply chain profession have transformed from
the “purchasing agent” mentality where staying in silos was the norm to
evolving into a “supply chain management” atmosphere where working with cross
functional and cross location teams is vital to success. Strategic sourcing
is organized since some type of methodology or process is needed; it is
collaborative since one essential requirement for any successful strategic
sourcing effort is that of getting functional elements other then Procurement
involved in the decision making and evaluation process.
A Review
of Strategic Sourcing Model. The Strategic Sourcing process requires an
organized approach or method that allows a supply chain function to
systematically work on spend areas or processes that can result in cost saving
benefits. There are 8 essential steps involved in the process beginning with
identifying a spend area and culminating with selecting and managing a
relationship with supplier(s).
All
sourcing models, regardless of origin, contain the following eight essential
elements:
- Identifying the targeted spend area
- Creating the sourcing team (Touch Point Required)
- Developing a team strategy and communication plan (Touch Point Required)
- Gathering Market Information
- Developing a supplier portfolio (Touch Point Required)
- Develop a Future State
- Negotiate, evaluate, commitment, and agree (Touch Point Required)
- Supplier Relationship Management·
Worth
mentioning is that during the process, Business Unit Manager Touch Points are
vital and as we progress through the step by step methodology, we will
interject when and why these Touch Points are crucial. Business Unit Managers
are defined as “any person in the organization who has an influence or is
impacted by the spend area being reviewed.” Needless to say, you don’t
necessarily have to possess a Managers title to qualify as a touch point; and
certainly there are management levels that need more attention in the touch point’s
process. We will now begin the journey of looking at each step of the process.
Step
1 involves the identification of Spend Areas that someone in the organization
deems an Opportunity
for improvement. Usually, this is done at the CEO, CFO, or CPO level and
involves selecting areas of spend that could produce cost reductions or process
improvements. And one essential element needed at the outset is an Executive
Sponsor to push the initiative along and keep it going.