What is Strategic Sourcing and Why is it Important?

Strategic sourcing is the use of a third-party organization to aid in procurement for organizations. 

The process can be used as an alternative or supplement by those who may be handling their own procurement internally. 

If done correctly, strategic sourcing can help to reduce costs to a large extent as you won’t need to hire full-time employees. Furthermore, it would also increase efficiency throughout the supply chain.  

Let’s look at some more benefits

The benefits of strategic sourcing

The list of benefits of strategic sourcing is endless. Here are some of them:

Risk Reduction

The major benefit is the reduction of risk by having a qualified third-party organization, like Vidl Sourcing, involved throughout the process. This way, if anything goes wrong, you have someone to turn to for support as opposed to doing it yourself and possibly experiencing more stress or even worse consequences.

Encourage Future Innovation

The strategic sourcing process itself is likely to encourage future innovation. If you are using an external service provider, they will provide a lot of suggestions for additional improvements that may be beneficial for your business and help you fine-tune your business model.

Time Savings & Increased Productivity

You will save a lot of time which will significantly increase productivity. In addition, obtaining a third-party service provider to handle the process for you may also help you better focus on your core competencies.   

How to apply the principles of strategic sourcing in your organization?

First, it's important to identify current problems within your supply chain. 

The identification phase should include all parties involved in the process including suppliers, factory managers and even employees working on the retail floor.

Next, define an order of magnitude for the cost reduction that you would like to accomplish. This way you will have a clear roadmap in mind and you can reward those who help you meet or exceed this goal.

Having a clear roadmap will help you choose the right sourcing partner

In order to remain competitive, it's important to have a well-defined strategy in place which should include the following:

Short-Term Opportunity

Each supplier will provide a unique price point so it's important to find at least one way to reduce costs in the short term.   

Long-Term Potential

At least one person should be assigned the task of conducting a thorough supplier evaluation and then determining if that supplier is capable of meeting long-term goals.

Total Cost

Once you've established your supplier it's important to calculate total costs for each of your products to make sure you are benefiting as much as possible.

Just-In-Time Purchasing

Once you've identified products that may be difficult to obtain, make arrangements with suppliers to either provide them on your behalf or develop a strategy to meet short-term business needs.

The value of the strategic sourcing process is exponential when done correctly. It's likely that you'll be surprised by how much you can accomplish in a relatively short time span.

The Vidl Sourcing team is trained to assist you with all the steps mentioned above and help your organization develop solid strategies for future success. Get in touch now.

Global sourcing strategies- best practices

As a business owner, you need to be familiar with the best global sourcing strategies even though you have hired a third party for sourcing.

The primary reason is that if you are not aware of the best practices, you will not be able to make the decision regarding which sourcing company is best suited for your needs.

So let's look at some of the best global sourcing strategies that work for all industries and companies.

First, decide what you want to achieve. Then take into consideration the size of your company and your needs and select a company accordingly.

A reputable third-party company should be able to provide tips and tricks for successfully navigating through the entire global sourcing process. The expert should be able to provide risk assessment, contract management, cost reduction tips and product development services among others.

The right strategic sourcing team will offer expert advice on various supply chain matters

Most importantly your strategic sourcing team should be able to provide you with expert advice on how to introduce the new supplier into your supply chain. 

They might even assist you in developing a training program that will enable your employees to work seamlessly with the new supplier.

If you are still unsure about whether the strategic sourcing company will be a good fit or not, it's important to ask your third-party company for additional information before signing the contract.

If the company can provide you with references, that would be the best testament to their capabilities and success.

Some companies might not reveal the names of their past clients due to Non-Disclosure Agreement (NDA).

In that case, look at their website and social media accounts and see if they are professionally built. You can also speak to the company representatives and see if they have all the required knowledge.

Whatever way you opt for, don't let inexperience get in the way.

Finally, you should be able to use the best global sourcing strategies when looking for suppliers along with receiving the necessary help to establish the right relationships while lowering costs.   

Choose the right strategic sourcing partner

As you read, there are many reasons to invest in strategic sourcing.

For one, it can help you reduce your costs and improve the quality of goods and services for customers who demand a high-quality product at an affordable price.

It also helps you take advantage of opportunities in emerging markets that may not be readily available or accessible otherwise.

If this sounds like something you would want to learn more about, we’d love to chat with you.

Our team has a combined experience of 20 years in helping companies successfully implement their own strategic sourcing initiatives so they too could avail these benefits!

Give us a call today or drop us a message if you think we might be able to help - we look forward to hearing from you soon!