Strategic Sourcing – Foundation for Supply Chain Success

Strategic Sourcing drives substantial results. After organizing for success and developing a portfolio of improvements, it’s time to develop commodity strategies and action plans, and deliver on the promise of substantial improvements. Strategic Sourcing is not a one-time event and must become a way of life in your organization. Well-developed Strategic Sourcing processes are a sure way to implementing a lasting culture of continuous improvement. With that in mind, let’s consider how to drive improvements in your organization:

Develop your strategies and action plans

A Sourcing strategy should be developed for each commodity. “Begin with the End in Mind”- what do you want to accomplish?  Include consideration for:

• Corporate strategy and goals
• Initiatives of other departments that have implications to Sourcing
• Purchasing goals and metrics
• Future needs relative to each commodity

Some key principles to keep in mind include:

• Work with suppliers or stop buying from them
• Develop assured sources of supply
• Consider the total cost of sourcing items from a supplier
• Work cross-functionally to develop strategies or at least get the buy-in of all stakeholders
• Reduce your supply base
• Identify or develop leverage to optimize negotiations
• Include roles for other functions in negotiations if appropriate
• It is important that you don’t try to do everything at once and just as important that you don’t let much time pass between actions. It takes time to create a habit and culture of continuous improvement.
• Celebrate the successes and the failures

Once the strategies are developed, create action plans and timelines for completing the tasks. Include consideration for resources required from other functions such as Quality, Engineering and others. Document and publish the strategies and plans.

Execute and measure results

Deliver, deliver, deliver… Then make sure your metrics match your goals and objectives. Metrics help motivate your team towards higher achievements and can also give you a heads-up when things are getting off track.

Review and update your strategies and action plans

As you execute the Strategic Sourcing plans you have developed, meet with your commodity teams on a scheduled, regular basis to review the results achieved. Measure the results per the metrics you developed. Communicate the status with the rest of the stakeholders. When needed, adjust the plans based on results achieved and new opportunities as they arrive.