How to Master Your Strategic Sourcing Process
Suppose you’re new to strategic sourcing, or you’re just taking a look at your strategic sourcing methodology to ensure that you’re following best practices. In that case, you likely are trying to find ways to enhance your process to ensure it runs more seamlessly.
You can take a few steps to ensure your strategic sourcing tools and techniques are working for you and that you have the right strategic sourcing software in place that is the best fit for your company.
Read on to learn more about strategic sourcing, its meaning, benefits, and ways to enhance your sourcing processes.
Your Strategic Sourcing Process: What Does Strategic Sourcing Mean?
Strategic sourcing is a procurement process that goes beyond typical sourcing or eSourcing. You would evaluate several suppliers thoroughly and select the supplier that is the best fit for your organization.
When you apply strategic sourcing to your procurement process, you will collect data, run spend analysis reports, take a hard look at spending, perform market research, and negotiate with suppliers.
The importance of strategic sourcing is difficult to measure, but without question, following the process will unlock savings for your organization by making more informed choices on how to select suppliers in the marketplace.
Adding strategic sourcing tools to the process delivers an additional level of savings to you by automating many of the tasks that will be performed, including adding the ability to achieve true market pricing through an eAuction and other software strategies SoftAuction or second-round bid with feedback.
How to Improve Your Strategic Sourcing Process
If you’re evaluating your strategic sourcing process, there are a few steps you can take to ensure that you’re using strategic sourcing best practices. The three steps you can take are:
- Look closely at your areas of spend. Perform a true spend analysis. From here, you might be able to see some quick easy wins if, for example, you are buying from the same supplier in multiple locations across your company and not negotiating as one company with them.
- Perform a supply market analysis. Look beyond your own walls to find alternate sources of supply from the market itself. Some of the parameters you should be looking at include the market growth rate, government regulations that may affect your suppliers, availability of potential suppliers, product differentiation, cost of switching suppliers, and availability of alternative products, should they be needed.
- Evaluate your strategic sourcing software. Is it doing everything it needs to? Are you able to perform all types of auctions? Does it have robust contract and vendor management features? Are the RFx features solid? If not, it may be time to look for something new.
Remember, the best strategic sourcing software is the one that best suits your needs.
If what you have isn’t working well, it’s worth dealing with the learning curve and switching to something new.
Your Strategic Sourcing Process: The Role of Reverse Auctions in Strategic Sourcing
Using reverse auctions in your strategic sourcing process is a strategy that also can improve the way your procurement process works. A reverse auction works differently than a regular auction, where you would bid on suppliers’ goods or services. Instead, in a reverse auction, you would let suppliers know that you need a particular good or service, and they instead take the role of the bidder. You can run the auction in different ways; bids are often not binding. You can use different strategies to get a good you want at a low cost. Reverse auctions are ideal for certain goods, such as raw materials, processed goods, components, and capital equipment. If you intend to use reverse auctions as one of your strategic sourcing techniques, ensure that your software has the capability.
Your Strategic Sourcing Process: The Primary Benefits of Strategic Sourcing
SMEs may be wary of opening up the door to the strategic sourcing experience because it does take some manpower and upfront investment in people and software. However, there are many benefits to using strategic sourcing solutions, such as:
- Enhanced reputation. When using strategic sourcing, you often build a better reputation and relationship with your supplier base.
- Risk management. Because you’re thoroughly studying the market, you can mitigate risk.
- Increased savings. Keeping an eye on spend and running spend analytics reports regularly saves on cost by minimizing savings leakage.
- Overall better decision-making. Staying focused and studying the market using strategic sourcing keeps you on top of things and helps you make better decisions.
Using a strategic sourcing process helps with efficiency and direct savings and is always an asset.
If you’d like to learn more about managing your strategic sourcing process or would like to schedule a software demo, contact EC Sourcing Group today at 973-936-9672. We want to help you reimagine the way you think about procurement.