Thursday 14 January 2016

Best Approach to Leverage Strategic Sourcing

Authored by Usama Shahid

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.