The practice of strategic sourcing allows the purchasing department to engage in the following tasks:
Analyze purchasing spend patterns and category profiles.
These activities aim to identify the goods and services that are crucial to the business strategy.
- The measure of a company’s spending in different supply categories, in terms of both quantity and diversity.
- The distribution of expenses across different supply categories for goods and services.
- Distribution by category of spend among different suppliers
- Percentage of a supplier’s sales by product category
Assess the degree of leverage the company has.
Buyers can compete in terms of volume, delivery, quality, and price with the marketplace by leveraging their position against suppliers, direct competitors, and other buyers. This leverage is particularly strong when purchasing commodities, as opposed to special customized goods or services.
Optimize costs and improve efficiencies.
To achieve continuous improvement, buyers must not only focus on optimizing costs and increasing efficiencies individually but also collaborate with internal cross-functional commodity teams dedicated to improving activities such as product and process design and redesign through value engineering and lean production concepts.
Commodity – An item that is traded in commerce. The term usually implies an undifferentiated product competing primarily on price and availability.
Establish and maintain relationships and improve the quality of suppliers.
To excel in strategic sourcing, buyers must cultivate stronger relationships with their suppliers. Key activities encompass the following:
- Establishing formal partnership agreements with suppliers, encompassing financial terms and opportunities for collaborative product and service design development.
- Analyzing supplier capabilities and assisting in enriching supplier competencies.
- Developing win-win contracts and practices that enable risk reduction, cost savings, and higher profits from joint initiatives.
- Introducing techniques to suppliers to improve the flow and quality of inbound materials and services.