Why strategic sourcing matters?

Strategic sourcing can be defined as a supply chain management approach which intends to harness the way information is collected and analysed to help organizations in consolidating their purchasing power. Over the years, strategic sourcing has proven to be effective in assisting businesses to join their business goals and purchasing strategy together. As a process, strategic sourcing is becoming crucial to the entire supply chain and procurement processes. It brings efficiencies across a wide gamut of spend categories and mitigates risks by offering insights related to pricing and forecasting holistically.

Steps of strategic sourcing:

Strategic sourcing involves data aggregation, spend analytics, and research coupled with negotiation and contracting. As a process, strategic sourcing can be tweaked or tailor-made to match customers' needs. The overall objective is to ensure profitability with the help of a single and integrated system capable of resiliency and agility. Some of the best strategic sourcing practices include document digitization and workflow automation. Strategic sourcing process can be divided into four simple steps.

*Data aggregation and Spend Analytics

Spend analysis involves data aggregation to empower organizations in making informed decisions concerning vendor alignment and offers visibility into where the money is being spent.

*Supplier Discovery : To gain strategic advantage, businesses need to have access to supplier data provided by a digital network so that suppliers can enter into a competitive environment and bid for RFPs.

*Art of Negotiation and Contracting : Automation helps in speeding up the workflows, thereby making the digital signature process efficient and straightforward. It can also help in creating a single repository of contracts for setting up triggers for renewals. Automated workflows and a single source of truth with respect to contracts make negotiations and renewals easier and seamless.

*Optimization : For better optimization, an automated sourcing process is needed so that businesses can act fast in assessing suppliers. Constant evaluation of suppliers is essential to ensure that as a business owner, you get the best sourcing agreements in place to service your clients and maximize your profitability.

Given the uncertainty unleashed by the global pandemic, business owners are asking their procurement teams to achieve more by improving strategic sourcing. Investing resources and time in improving strategic sourcing is going to be crucial for sustainability and profitability of the business, both in the short and long term.