Onesphore RAKOTOMALALA

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 What is Strategic Sourcing ?

➝ Strategic sourcing is a procurement process that aims to efficiently acquire the

goods and services needed by the company at the best possible value.

It goes beyond traditional purchasing by incorporating long-term planning,

analysis, and relationship-building with suppliers.

Strategic sourcing relies on three key components:

Business Spending market conditions supplier base

Profile

Why Strategic Sourcing?

It helps in reducing purchase prices and operation costs.

It analyzes suppliers' processes to identify and minimize potential risks.

It boosts long-term relationships with suppliers, enhancing efficiency and growth.

It aligns purchasing strategy with business objectives for competitive advantage.

 P
Strategic Sourcing rocesses

➝ The strategic sourcing process includes the following 7 core steps:

1
Profile the Category

2
Supply Market Analysis
3
Develop the Strategy
4
Select the Sourcing Process
5
Negotiate & Select Suppliers
6
Implement & Integrate
7
Benchmark & Track Results
 Strategic Sourcing rocesses P

Step 1 - Profile the Category

Understanding everything about the spend category is the initial step in the strategic
sourcing process.

:
This involves
→d efining the category and its commodities, i entifying users and their locations,

→ d

→ assessing current usage, types, and sizes, →outlining processes,

→ and i entifying other stakeholders in the supply chain.
d

k
Step 2 - Supply Mar et Analysis

Analyze the market to understand buyer power and category dynamics.

High

Leverage items Strategic items

Utilize tools like Kraljic’s Matrix to segment

Profit Impact

Non-critical
items
Bottleneck items
vendors based on risk and profitability.
Low

Low Ris k / Complexity High

This segmentation provides clarity on how products/services affect the business

and guides strategy and partner selection.
 Strategic Sourcing rocesses P
Step 3 - Develop the Strategy

Determine where and how to buy to minimize risk and cost. Consider current and
potential suppliers, align with business objectives, and set tailored selection criteria.

Involve a cross-functional team for input.

The strategy should consider alternatives to current suppliers, market competitiveness,

and user openness to new suppliers.

Step 4 - Select the Sourcing Process

R
The most common sourcing method is using a equest for roposal ( P R P process
F )

for soliciting bids.

It includes product or service specifications, delivery and service requirements, pricing

breakdown, cost analysis, and legal and financial terms and conditions, along with
stated evaluation criteria.

Step 5 - Negotiate & Select Suppliers

Shortlist potential suppliers and conduct interviews for clarification. ather as much
G

information as possible to make informed decisions.

Assemble a knowledgeable team to ask relevant questions during supplier interactions.

 Strategic Sourcing rocesses P
Step 6 - Implement & Integrate
Notify successful suppliers and involve them in the implementation process, which
varies depending on the degree of changes.

The communication plan should include any improvements to specifications or

processes, changes in delivery or service requirements, or pricing.

7 B
Step - enchmar k & Track Results
Benchmark the current status of the commodity or category, monitor results, and
ensure full value is achieved.

Restart the process in a constantly evolving marketplace by reviewing the supply

market again.
 How to Implement Strategic Sourcing

➝ To implement strategic sourcing effectively, organizations should follow these

steps:

Identify and Categorize the Spend Profiles

Identify spend areas across all business areas and categorize them
based on their criticality.
Prioritize sourcing activities for each spend area, consider risk analysis.

Analyze the Supplier Mar et k

Analyze current and future suppliers' profiles, revenue, market share,
risks, and opportunities.

Build a Sourcing Strategy

Identify business unit requirements, define goals, objectives, and
timelines, and establish a communication workflow for stakeholders.

q
Re uest the Supplier Information and Identify the Selection Criteria

Request R Is/R Ps/R Qs from suppliers, communicate requirements

F F F

clearly, and identify selection criteria based on submitted information.

 How to Implement Strategic Sourcing

Select the Suppliers and Execute the Contracting Process

Choose the suppliers that can offer the highest level cost savings and
along with delivering quality, then start the contracting process to
onboard them.

Measure and Trac k Periodically the Supplier Performance

Measure supplier performance against objectives, track periodically,
and identify improvement areas.

Implement the Supplier Relationship Management (SRM)

Implement SRM to enhance collaboration between the organization
and suppliers, building long-term relationships for mutual benefit.

Popular Sourcing software

 Benefits of Strategic Sourcing

➝ Strategic sourcing offers several advantages:

Cost Savings: Lower costs are achieved through volume discounts, improved
negotiations with suppliers, and streamlined processes.

P
Improved Quality: roduct and service quality are ensured through rigorous supplier
evaluation and ongoing performance monitoring.

Supplier Collaboration : Closer collaboration with suppliers fosters innovation, fle ibility,
x

and responsiveness.

Competitive Advantage: Optimizing procurement processes, leveraging market

insights, and enhancing supplier relationships provide a competitive edge.
 C f
hallenges o Strategic Sourcing

➝ Organizations encounter several challenges when implementing strategic sourcing.

:
Resistance to Change Internal stakeholders may resist moving away from traditional
procurement practices.

Complexity: Managing multiple suppliers, contracts, and sourcing categories

can be complex and resource-intensive.

Supplier Reliability : Dependence on suppliers' ability to meet quality, delivery, and

capacity requirements.

G : Managing
lobalization sourcing activities across diverse regions with varying
regulations, cultures, and market conditions poses challenges.
 How to Improve Strategic Sourcing?

➝ rganizations can enhance strategic sourcing by

O :
Enhancing Supplier Relationships : Build closer relationships with key
suppliers through regular communication and collaboration.

z : S
Utili ing Technology Embrace e ourcing tools to automate tasks, improve

data visibility, and enhance decision-making.

:
Focusing on Innovation Encourage suppliers to collaborate on new product

developments and process improvements.

Benchmarking Performance: Compare sourcing performance against

industry standards to identify areas for improvement.

Training Personnel : Provide training opportunities for sourcing personnel to

enhance their skills and knowledge.
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