"Strategic Sourcing" defines in concern of Blue Chip Companies and why this concept becomes more popular at global business scenario ?

Hello,

Strategic Sourcing is valuable for organizations with a clear vision of the future and a well-defended corporate strategy. Strategic sourcing allows you to analyze your current situation and be able to compare it with where you would like to be after a certain period and what is required in order to achieve your targets by analyzing:

1. The spend.

2. The market

3. Current vs Future requirement

4. New technologies,

5. Your competitions

6. Preferred contract strategy.

7. Current and potential suppliers.

8. ...etc

Establishing sourcing strategies is a trend that most blue chip organizations is currently applying for many reasons. In my view the main reason is Globalization: where competition is fierce the pressure on SCM is increasing for allocating new sources of supply or re-negotiating with current suppliers for optimized Purchasing & Contracting conditions. It also secures the flow of required material/equipment/services for sustainable production. When you have strong relations with your suppliers you are usually their priority if urgent / ad hoc / unplanned deliveries are needed.

Another key benefit is facilitation of payment term as you will definitely be able to negotiate a much better payment terms; reducing down payments percentage or no down payments at all, waiver of LCs….etc.

Organizations seeking to penetrate new markets need to establish strategic alliances with highly qualified vendors in order to be able to negotiate cost of supplies and services, in terms of price, total cost of owner ship, quality, lead-time, additional services…etc. Also to benefit from this alliances in networking with new potential customers benefiting from the knowledge and experience of the new alliances (gathering market and price data).

You can write books on strategic sourcing it’s indeed a very interesting topic :)

I hope that was helpful.

Best regards,

Rania

I agree with Rania, and I would like to add that the strategic sourcing is a process made of multiple levels of activities that you perform during the year. 

You will need a powerful analytical tool integrated with your main ERP platform. Usually the more mature the company in this process they will have all bells and whistles, which will allow you to monitor and manipulate data to the transactional level. 

- Opportunity Analysis / Category Analysis

- Kraljic matrix (/category/supplier segmentation)

- Third Party Risk Assessment and Risk Mitigation plans 

- Account Management plans with key business stakeholder (you need to engage the business owner and help consolidate the number of vendors to work with so that you leverage your large spend in such category , but this is to a certain extend so that you don’t impact the supplier innovation)

- Based on your shared goals with your internal clients and the refined data you will get from the first2 steps, you will be able to build a category strategy. 

- In the4th Qrt.  you usually validate and report the savings and update your strategy and define your (TCO) Total Cost of Ownership where applicable. Beside that you need to keep taking notes through out your SRM process (Supplier Relationship Management) through business review meetings to speak about KPIs and SLAs and the business improvement plans, the more mature the companies in the strategic sourcing concept the more they pay attention to SRM.

While you are doing all the above on a local level, you have the complexity of aligning the same to the global strategy specially with global and regional vendors and categories. 

I know that I missed so many points but it is very complicated process and would seriously take books to write.