What is strategic sourcing?
Strategic sourcing is a procurement process that brings together key tasks like spend analysis, research, data collection, contracting, and negotiation. Strategic sourcing is critical to helping procurement managers leverage their purchasing power and secure better deals.
Strategic sourcing also helps to minimize risk, improve supplier selection and relationships, and ensure that the supply chain is always as efficient as possible by creating efficiencies across spend categories — activities that can be maximized with a software solution. The purpose of strategic sourcing is to help the business operate as efficiently and effectively as possible.
Sourcing vs. strategic sourcing vs. tactical sourcing
Sourcing has one primary objective: securing the best price from suppliers. Strategic sourcing, on the other hand, focuses on the total value, service quality, and innovation — not just the price that suppliers provide. Strategic sourcing is also a more dynamic process that prioritizes supplier relationship management.
Tactical sourcing tends to be a well-defined and structured process that emphasizes speed and delivering the lowest cost possible. The goal of tactical sourcing is shorter lead times and fast order processes with little thought to developing long-term value. In contrast, strategic sourcing is typically a complex and continuous process.
How strategic sourcing affects procurement
This approach to sourcing has a direct impact on procurement and purchasing processes. Not only does strategic sourcing help companies remain competitive in the marketplace by reducing spend, it also expands procurement expertise outside of just purchasing.
With a standardized and systemic strategic sourcing process, procurement managers can focus on acquiring goods and services at the lowest total cost, not just the lowest purchase price.
Strategic sourcing benefits
In addition to creating efficiencies across spend categories, strategic sourcing also generates additional benefits like:
- Higher cost savings.
- Mutually beneficial long-term relationships with suppliers.
- Improves alignment of sourcing and business objectives, as well as communication between key players.
- Better supplier discovery and selection, and demand forecasting.
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Main strategic sourcing challenges
One of the biggest challenges to strategic sourcing is the slower pace of technology adoption. As a result, many of the workflows and tasks involved in strategic sourcing are still being done manually. This drags down agility and consumes valuable resources.
In addition, two other challenges often encountered in strategic sourcing include:
- Supplier management. Suppliers are key partners in strategic sourcing, and mismanaged or non-existent supplier relationships or lack of performance analysis can keep organizations from cashing in on the benefits of strategic sourcing.
- Accurate forecasting of demand and spending. Business objectives impact budgets and budgets can impact business objectives. So when it comes to forecasting demand and spend, making educated guesses just doesn’t cut. In order for strategic sourcing to work effectively, accuracy and visibility are necessary for negotiations and responses to real-time market conditions that can affect procurement.
Tips for improving strategic sourcing with low-code BPA
Strategic sourcing will continue to play a critical role in overall business strategy. This is especially true during periods of economic contraction, in which the importance of costs and efficiency are magnified.
Here are some tips for more effective strategic sourcing skills and how low-code business process automation can help turn your strategic sourcing process into a competitive advantage.
Digitize supplier information for increased accuracy and control.
Digitization improves the accuracy and accessibility of information, and this is especially important for strategic sourcing. That’s because an ineffective sourcing process can mean missed opportunities or delays in planning, and errors can cost businesses money.
Low-code automation makes it easy for sourcing teams to digitize their work. Teams can capture incoming data through forms or email, streamline approval flows, and integrate data across systems and apps.
Automate your strategic sourcing process.
Automation increases the speed and accuracy of the sourcing process. Elevate your sourcing process with business process automation. By automating key steps in your process, like communication, approvals, and handoffs, speed up vendor selection to cash in on missed savings, optimize overall spending, and save time by eliminating time-consuming tasks.
Tap into your sourcing data to improve supplier relationship management.
Get visibility into how suppliers are performing with reliable and historical data pulled right from your strategic sourcing process. Solve inefficiencies and gain the flexibility to spot forecast errors and adapt your strategy as needed.
With intelligent supplier insights, get a better understanding how supplier criticality, reduce risk, proactively identify opportunities for mutually beneficial innovation, and support cost savings.
Never lose sight of collaboration, whether it’s with internal or external partners. Process automation platforms make it easy to connect processes for increased oversight over critical communication that informs negotiations or planning — all from a single platform.
Plus, with a digital collaboration platform, easily manage recruiting, training, and supervising a team of Category Managers who are responsible for day-to-day category management activities.
Create a seamless strategic sourcing experience with Pipefy
Strategic sourcing is an essential function and — in today’s climate — necessary to navigate supply challenges. While you can customize your strategic sourcing process to meet your specific needs, the true benefits and enhanced business profitability can be gained with the help of a central, integrated system like Pipefy.