Strategic sourcing is a process that influences every aspect of a company. Internal engagement with stakeholders and suppliers and critical expenditure analysis, and supplier risk management are all part of the process. It allows you to identify supply risks and devise a strategy to address them.

You can match purchasing power with the total value proposition and establish a broad supply base with a better strategic sourcing strategy.

You may also figure out how to cut supply chain expenses and control supply risks. As a result, you must strengthen your strategic sourcing approach. The experts at SpendEdge have highlighted the essential phases involved in enhancing the strategic sourcing process to assist you in building a successful strategic sourcing methodology and realizing the advantages of the strategic sourcing process.

The Process of Strategic Sourcing

Step 1: Determine Where You Want to Spend Your Money

Improving the strategic sourcing process begins with identifying expenditure areas. This is done at the CEO, CFO, or CPO level, and it entails identifying areas of spending where cost savings or process improvements may be made.

Prioritizing the various spend categories depending on the company’s objectives is critical to this phase. Collect and evaluate data about your organization, then create the structure you’ll need to split the whole supply chain into several groups. This will assist you in classifying expenditures and determining where they occur.

Do you want to learn how a better strategic sourcing approach may aid in analyzing expenditure areas and identifying cost-cutting opportunities? To gain free access to our solution portfolio, submit a request for a free proposal.

Step 2: Analyze the Supply Market

Begin your supplier market research by looking for suitable suppliers and identifying those that may benefit your company. Supplier market study, demand analysis, supplier choices, and category risk analysis are all part of the process.

Collect information for a supplier base that can provide a variety of products. Consolidate supplier data in addition to current customers. Analyze your spending in several areas and compare it to supplier revenue. This will assist you in determining how important you are to the provider.

Then, choose vendors, conduct supplier interviews. Send out RFIs to possible vendors and compare the costs to what you’re paying now. This will assist you in determining whether or not it is prudent to continue working with present suppliers. To conclude this stage, conduct a category risk assessment to see if new suppliers are worth the risk.

Step 3: Examine your Present Sourcing Methodology

Engage with stakeholders to learn more about the items that suppliers use. Learn why they choose some goods over others less expensive and look for methods to save money without sacrificing quality.

Make the strategic sourcing process more efficient by identifying comparable or alternative components compared to your present ones. Compare potential suppliers to present ones and figure out what the hidden costs of new suppliers are. Even if you don’t plan to purchase from other countries, assess suppliers and products worldwide to gain a global perspective.

Step 4: Create a Strategic Sourcing Plan

Develop a detailed plan to find strategies to decrease costs and risks after a strong understanding of your expenditure areas and supply market. But first, learn about present suppliers’ capabilities and the business units’ future needs for the commodity or service. This will assist you in identifying and establishing timetables and milestones to help you achieve your goals. Furthermore, such tactics will negotiate the greatest possible deal with the suppliers you select for your company.

Step 5: Choose a Good Supplier

Send an RFI or an RFP to acquire useful information after self-evaluating the providers. Define your needs and ask specific questions to get a complete picture of the product, processes, policies for continuous improvement, and expenses. Develop a supplier portfolio and a score after you receive the questionnaires from potential providers. This will allow you to compare your requirements scores, calculate the minimum score a supplier must meet to qualify, and optimize your strategic sourcing process.

The strategic sourcing approach necessitates the creation of a supplier portfolio. To begin your free trial, request a demo.

Step 6: Begin the Request for Quotes (RFQ) Process

Since you’ve narrowed down your selection of suitable organizations that might be able to satisfy your demands, send a request for an estimate to your current provider (RFQ). This will increase competition and assist you in obtaining the greatest value in terms of cost reductions. Prepare paperwork for each vendor, including a description of your organization, the project, and background information, as well as terms and conditions that must be adhered to while making a bid. This allows you to spend less time negotiating, keep the process transparent, and execute contracts at best possible pricing.

Step 7: Keep Your Supplier Ties Strong

This is perhaps one of the most underappreciated components of the strategic sourcing process. After such a time-consuming process of vendor selection, companies fail to derive significant value from their providers.

Setting up a good supplier relationship management program can help you achieve the savings and benefits you hoped for during the early stages of strategic sourcing. Implement new ideas or procedures, work with the selected supplier(s) to establish continuous improvement cost drivers, and fine-tune the scorecards to keep the momentum going.