7 Steps to Strategic Sourcing

Statistical studies have revealed the increasing role played by strategic sourcing in every organization what with high pressures on Procurement to achieve maximum cost savings in resources. Almost all organizations resort to the latest technology to obtain great efficiencies in their sourcing process.

An organization can follow a seven step procedure to obtain efficiency in their sourcing process. A brief of each of these steps is outlined below:

Identification of Spend

On getting the relevant purchase requisition from one of the departments, the procurement team conducts an analysis of the same. The use of technology has made their task easier and they can get detailed reports in very less time; for example classification of spend with a particular supplier.

Identification of Best Supplier Fit

The analysis made by the procurement team enables them to identify the best supplier fit. There are several factors that go into consideration. Some of them are the supplier’s financial stability, business performance record, reputation in the market and so on. In this context, there are two options available to the organization namely choosing from the available set of suppliers’ database or searching for a new one.

Preparing a Supplier Survey

If the choice falls upon a set of new suppliers then all the necessary information about them is obtained by the procurement team. This would be with a focus on areas of feasibility, maturity, capability and capacity. Details about their manufacturing plant, certifications, whether they have business relations with competitors etc are also included.

Asking for Quotations/Proposals (RFQ/RFP)

All the short-listed suppliers will be asked by the organization to give their proposals or quotations. The request for quotation or proposal should clearly lay down all the requirements that have to be fulfilled by the prequalified suppliers.

Communicating the Bidding Event

Bids are then invited from the relevant suppliers. Modern technology has greatly facilitated the staging of this event, with suppliers in different time zones being able to participate in the bids.

Analysis of Supplier Data

Analysis of the bids forms the next step. Collaborative scoring is obtained from management at different levels and for different suppliers. Here again, many factors are considered during the analysis other than the price factor. A few of them are the supplier’s share of the market, product quality, his adherence to delivery schedules and whether he is a niche or a global player etc. The department who sends the purchase requisition is also included in the analysis process.

Selection & Communication

The contract is awarded to the supplier who best meets all the requirements. Automated systems greatly facilitate to make the choice of the best supplier fit. Once this stage is completed the organization needs to develop an effective communication plan that will make the implementation easier.

However, if it is not possible for an organization to build a strategic sourcing process then it is advisable for the organization to outsource strategic sourcing Analysis services to an outsourcing service provider.

Strategic Sourcing Management, Procurement Transformation, Finance and Procurement, Strategic Sourcing Consultancy

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