Strategic sourcing is a procurement process that assesses and evaluates a company’s purchasing activities on an ongoing basis. It is considered part of supply chain management, where the goal is to minimize supply chain costs, leaving the chain intact.

Strategic sourcing is a systematic process focused on obtaining the maximum advantage of costs, processes, quality and technology, taking advantage of the purchasing power of the company. It is an organized and collaborative approach to reducing costs while maintaining or improving service and quality. Unlike traditional sourcing, strategic sourcing involves an ongoing relationship between buyers and suppliers, which is a win-win collaboration. It also increases the visibility of the entire supply chain through true collaboration.

Strategic sourcing has many advantages, such as cost savings, standardized pricing, access to new suppliers and vendors, increased operational efficiency, established purchasing procedures, and a relatively shorter cycle time. Savings from strategic sourcing can come in a number of ways, such as expense consolidation, demand management, process improvement, competitive bidding, LCCS, restructuring, and supplier relationship development.

Strategic sourcing begins with evaluating a company’s spending, looking at the supply market, analyzing cost, identifying the right vendors and suppliers to develop a new sourcing strategy, negotiating with suppliers, implementing the new supply structure, and tracking the results. This process is cyclical and many companies adopt it as part of the overall sourcing strategy.

For successful strategic sourcing, a company needs to understand and identify the most impactful cost reduction opportunities. A thorough review of expenses and collection of expense data are required. After that, a savings estimate is made for the project. Therefore, an expense assessment is the first step in looking at a company’s needs, its purchasing power, and the extent to which it is harnessing that power. You need to adopt an effective sourcing methodology as the next step. This will address things like product specification and therefore use the most ideal contracting and negotiation strategy for the product category to achieve the lowest cost.

The next step in the process is a vendor engagement and contracting process. This can be done using outsourcing technology and tools that greatly aid the process and increase efficiency. Subsequently, the selected provider profile is developed and a strategy followed by the implementation methodology. This entire process, strategy, and methodology is then integrated with operations and tracked on a regular basis.

Strategic sourcing is used to strengthen a company’s competitive advantage. It is itself a touchstone in outsourcing. It is to obtain the best services and products at the best price. What sets her apart is her focus on constantly improving and evaluating a company’s purchasing activities and her flexibility in process improvements.