Strategic sourcing refers to the systematic process of identifying, evaluating, and selecting suppliers that can provide goods and services that best you’re your organization’s needs, including quality, delivery, cost, and performance.
In the last two decades, strategic sourcing has become an essential component of successful business operations at major corporations. It has helped businesses achieve cost reduction goals, increase efficiency, and improve quality of goods and services. Strategic sourcing can be a game-changer for businesses, as it enables them to focus on their core competencies while outsourcing non-core functions to capable suppliers.
As the COVID-19 pandemic recedes (hopefully), businesses worldwide are looking at the aftermath of disrupted supply chains and changes in their operations, pricing, and supply chain disruptions. The pandemic has shown that even the most sophisticated businesses were not prepared for such a crisis, and their sourcing strategies were not robust enough to withstand it.
Therefore, the post-pandemic business environment presents an opportunity for companies to revisit their sourcing strategies, reassess their suppliers and reexamine their supply chains. In this environment, strategic sourcing will be essential for businesses after the pandemic, and will bring operational benefits to companies that undertake this examination.
Strategic sourcing is often synonymous with helping to reduce costs. By reanalyzing their options, business can identify suppliers that offer the best value for money and open up bidding processes to suppliers that reward the most efficient suppliers.
When done well, it should also help to improve the quality of goods or services. A holistic look at what your company needs- including financing options, inventory options, delivery options or quality- can create a net impact on your business that is more important than just price.
Finally, strategic sourcing can improve supplier relationships. By working with suppliers and establishing fair, competitive long-term relationships, businesses can lock in for the long-term with committed suppliers that become beneficial for both parties. At its best, it’s a very partnership-based, Japanese approach to building your company’s strengths.
COVID-19 pandemic has exposed vulnerabilities in supply chains, and it is crucial for companies to revisit their sourcing strategies after the pandemic to ensure they are robust enough to withstand future crises. Taking a fresh look at your supply chain is leading more companies to favour a diversified supply chain that is less vulnerable to disruptions and future supply risks.
Revisiting your sourcing strategies provide a fresh opportunity to evaluate your supplier relationships including your suppliers’ capacity to meet demand, and how much the supplier will prioritize your if there is a supply chain issue. Its also an important time to assess the supplier’s financial stability, as the pandemic has caused financial hardship for many businesses.
The last point is to evaluate your sourcing strategies in light of technological advancements. The pandemic has accelerated the adoption of technology, and businesses need to incorporate it into their sourcing strategies. By leveraging technology, businesses can automate their procurement processes, reduce costs, and improve efficiency. They can also use data analytics to gain insights into their supplier performance and identify areas for improvement.
We have a lot of experience in strategic sourcing. From initial training and implementation at AT Kearney and Deloitte, to working with manufacturers and financial services companies, we know the field and the opportunities that it can unlock. Its no accident that ‘strategic’ is in the name- it can make a very real impact on margins, flexibility, and ease of delivering your product or service.
Strategic sourcing will likely experience a renaissance as businesses feel inflation-related pressure to reduce costs, improve quality, and have a more robust supply chain. The pandemic has highlighted the importance of sourcing strategies, and businesses need to revisit their strategies to ensure they can withstand foreseeable future crises including trade-wars, on-shoring, and shipping issues. You will improve their operations, reduce costs, and de-risk your operation.