Strategic Sourcing methodology is used to identify, examine, select and implement sourcing alternatives for a specific Sourcing Group (SG). It encompass the whole process for evaluating, selecting and aligning with supplier(s) to achieve operational improvements and support overall strategic objectives. Strategic Sourcing focuses on total costs and not just the purchase price; Strategic Sourcing assists an organisation by gaining a good understanding of its requirements, knowing how it must map to the existing supply market, and then develop a plan for both short and long-term objectives. There are many ways to segment a strategic sourcing program into a step by step approach. One is to divide it into seven steps as shown in the diagram below.
Key points to know are following:
- The Strategic Sourcing methodology assumes that Sourcing Groups (SGs) have already been defined, either through a Sourcing Opportunity Assessment or through any other mean.
- The methodology is designed to be carried out by an “SG team,” comprised of people with a broad range of backgrounds, playing several roles. For example, the SG team typically would include a decision maker, facilitators, technical experts (e.g., supply market experts, engineers) and other cross-functional members as representatives of the user community.
- The methodology provides general guidelines in areas such as finding potential data sources, identifying the appropriate depth of analysis and selecting the applicable sourcing and negotiation approaches.
Each step will be detailed in future posts.