Modern-day businesses are continuously optimizing the power of globalization to expand their markets and profitability. That is why strategic sourcing has become even more important in the existing global market. Many strategic sourcing companies have come forward to help multiple businesses. When it comes to sourcing, supplying goods and services comes first in the mind. But apart from these, procurement is also an integral part of strategic sourcing.
Some burning issues, such as economic and political changes, and technological disruptions have made the market fiercely competitive. Therefore, organizations need to deploy strategic sourcing skills and processes to improve their operations and performance and stand one step ahead of their competitors.
Definition of Strategic Sourcing
It refers to the process of finding the spend profile of an organization and the supplier base of an organization. Its main aim is to ensure that an organization’s requirements are aligned with the offerings of the suppliers.
The emergence of strategic sourcing indicates that most companies are aware of it. It covers many sub-concepts. Sometimes, it makes the process a little bit complex. To make it simple, an organization should understand a few things:
Strategic Sourcing vs Tactical Sourcing
Strategical sourcing engages the development of a proactive and promotes holistic and ongoing monitoring and re-monitoring of the sourcing activities in an organization. It intends to gain the lowest Cost of Ownership (TCO) with minimal supply chain-related risks. Therefore, it shows an organization’s relationship with its sourcing partners.
Tactical souring engages a short-term and conventional reactive approach towards organizing the sourcing activities of an organization. It intends to acquire the lowest possible cost without taking other factors like supplier relationship management, risk mitigation into consideration.
Unlike strategic sourcing, tactical sourcing does not entail large investments in technology-powered platforms and personnel skillsets.
Benefits of Strategic Sourcing
Once the strategic sourcing concept is clearer to you, it is important to develop an insight into the key benefits of strategic sourcing. Listed below are four main benefits:
Escalated Level of Cost Savings
It offers a higher level of cost savings. By finding and selecting the suitable suppliers that can offer the highest value at the justified pricing, you can continue gaining higher cost savings.
An Amalgamation of Sourcing and Business Objectives
Aligning the sourcing activities of an organization to its goals and objectives plays the most important role in strategic sourcing. A perfect amalgamation enables the businesses to gain higher business performance with greater efficiency and minimal risks associated with chain risks.
Optimization of Ideal Suppliers
If you want to implement strategic sourcing as an option for your business, it is essential to analyze the profiles and core capabilities of the suppliers. Once it is done, your organization is equipped with information that will enable you to align your objectives with that of your suppliers. It provides the highest value-creation at the lowest prices.
Long-Term Relationship Building with Suppliers
Nowadays, many businesses seek help from strategic sourcing companies to build strong and long-term relationships with their suppliers. As this approach focuses on the core abilities of the suppliers, by following it, you can select the right suppliers for the right objectives that you need to source.
Market experts, from every corner of the world, have opined that strategic sourcing is going to stay here for the coming years.