Strategic Sourcing is a systematic and fact-based approach for optimizing a company’s supply base and improving the overall value proposition. Many companies make the mistake of thinking strategic sourcing and cost control are synonymous—although cost control is a big contributing factor, strategic sourcing requires both internally- and externally-facing activities.
Internally-facing activities are comprised of the procurement department’s relationship with other departments within the company. Externally-facing activities include sharing information with suppliers and developing relationships with those suppliers. To start, procurement professionals need to have a clear understanding of their company’s strategic goals and objectives. They need to have the power to restructure and rebuild relationships with suppliers to support the company’s goals. To do this, companies should reexamine their own strategic sourcing initiatives through self evaluation and internal restructuring.
Internally-facing activities are critical for procurement professionals—they help them understand the needs of other departments. These other departments are the ‘customers’ of the procurement department. The procurement department should participate in cross-functional training to get a better understanding of the other department’s wants and needs.
Externally-facing activities, like information sharing, are strongly linked to the significance of a supplier. Determining how much or how little a company should share is the hard part—it can become critical when the purchase is important due to scarcity, its role in the operation, or its monetary value.
Another great way to improve your company’s relationship with your suppliers is by developing their capabilities or improving their performance. Depending on the significance of the supplier, your company could provide feedback, offer technological assistance, or even help with training.
Using both internal and external activities cohesively can benefit all aspects of your company. A team that works and communicates effectively separates the top companies from the rest. Determine what your company’s strengths and weaknesses are and build your procurement team’s relationships with departments within the company and with their suppliers.
Strategic sourcing is a continuous process that addresses all levers for savings. At Avontis, we can help your company work on your strategic sourcing’s internally-and externally facing activities. Contact Avontis today for more information.