In the discussion about sourcing strategies, we emphasized the difference between traditional sourcing and strategic sourcing. The main goal of strategic sourcing is to locate and manage suppliers that provide important products and services to a company.
We explored the five basic steps in the sourcing process:
1) the make-or-buy decision
2) supplier scoring, assessment, and selection
3) pricing, negotiation, and contracting
4) design collaboration
5) supplier relationship management (SRM)
The purpose of the make-or-buy decision is to enhance a business’s primary strengths and utilize vendors’ abilities. If the choice to outsource is finalized, the subsequent step is to align the purchasing needs with the preferred kind of supplier association.
When two parties share common goals, invest jointly, and have interconnected processes, they form a strategic relationship. Once a supplier is chosen, maintaining a long-term relationship with them begins. Supplier relationship management aims to establish a mutually beneficial relationship between the buyer and seller. To ensure the successful execution of this process, a comprehensive implementation plan and a set of performance metrics are necessary. These metrics should be tied to defining the SRM strategy, effective supplier communication, and ongoing improvement.