Strategic sourcing is an approach to supply chain management that formalizes the way information is gathered and used so an organization can use its consolidated purchasing power to find the best possible values in the marketplace and align its purchasing strategy to business goals. Show
Strategic sourcing is growing in popularity, as digital transformation is causing procurement and supply chain processes to evolve. It requires analysis of what an organization buys, from whom, at what price and at what volume. Strategic sourcing differs from conventional purchasing because it places emphasis beyond initial purchase price to focus on total cost of ownership and optimizing the sourcing process through ongoing market analysis and building relationships with suppliers. How it worksBusinesses can use strategic sourcing to make their procurement processes less shortsighted and focused on price. A sourcing plan can instead allow them to develop an adaptable system that contributes to the overall value of the business long term. The process begins with analyzing business needs and historical spending, followed by outlining a strategic plan, and then conducting data collection and market analysis that guides selection of a roster of suppliers. Once selection and negotiations have taken place, strategic sourcing also involves measuring performance and improving the process on a continual basis. Strategic sourcing is generally practiced by large organizations with many suppliers. Outsourcing providers for strategic sourcing exist for organizations that wish to delegate the function to a specialist. Strategic sourcing process stepsThe strategic sourcing process has many variations, but is most commonly broken into seven steps popularized by consulting firm A.T. Kearney. These include the following:
BenefitsThe most obvious advantage of strategic sourcing is reduced total cost, but the benefits of rethinking the sourcing process can be far-reaching. As businesses take advantage of the vast amounts of available data and digitization of business processes, procurement is an area ripe for transformation. According to Gartner's Magic Quadrant for Strategic Sourcing Application Suites, the top reason for investing in a strategic sourcing suite is to transform sourcing within the organization, at 74%. Businesses also reported increased productivity through automation (65%) and increased savings (61%) as top drivers for pursuing strategic sourcing. The increased understanding of supplier markets can help identify potential risk factors and help businesses develop sourcing plans that mitigate them. In addition, the emphasis on continuous improvement and sustainability of the supply chain provides increased flexibility and the ability to adapt to external factors. Longer term, implementing strategic sourcing can facilitate strong relationships with suppliers and outsourcers, identify potential improvements and provide justification for changes to improve efficiency throughout supply chain processes. ExamplesA strategic sourcing plan can help businesses achieve a number of goals that contribute to success. Examples include the following:
Strategic sourcing vs. procurementProcurement refers to the range of activities and procedures necessary for businesses to acquire products and services. While this technically involves both strategic and administrative responsibilities, procurement departments often focus on the day-to-day transactions and processes involved in e-procurement, such as purchase orders, invoicing and payments. In contrast, strategic sourcing emphasizes the activities leading up to an actual purchase, including analyzing business needs and the marketplace at large. While procurement generally looks for the lowest-priced option, strategic sourcing keeps the big picture in mind, employing large sets of data to evaluate the value of other factors, such as optimal vendor relationships and reduced risk to the business. Software productsStrategic sourcing software can facilitate the approach by standardizing sourcing requirements and providing a platform for collecting information about suppliers, products, markets and business needs. This software is sometimes part of larger procurement systems, procure-to-pay platforms, ERP systems or supply chain management systems. Products that are labeled "strategic sourcing application suites" are growing in popularity, however. These typically include functionality -- and often have separate software modules -- for e-sourcing, spend analysis, contract management and supplier relationship management. Major players according to Gartner include Coupa, GEP, Ivalua, JAGGAER, SAP, Synertrade and Zycus. Their products are delivered primarily via multitenant SaaS, but some offer on-premises or private cloud versions, as well. Vendors are working on integrating advanced analytics and AI to make the sourcing process more effective. These capabilities can make recommendations based on past performance and current metrics and offer predictive models based on factors like market conditions, time of year and geopolitical factors. The integration of blockchain into the supply chain is also increasing visibility and accuracy in some cases. This was last updated in October 2019 Continue Reading About strategic sourcing
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What is the term that refers to the flow of information materials and services from the start with rawThe correct answer to the given question is option D) supply chain. The flow of information, materials, and services from raw-materials suppliers through stages in the operations process until the product reaches the end customer is called as the supply chain.
Which term refers to a set of methods and technologies used to produce a good or service?Which term refers to a set of methods and technologies used to produce a good or service? operations process.
What is the name for a production system in which all the needed materials and parts arrive at the precise moment they are required for each production stage?In theory, a JIT system would have parts and materials arriving on the warehouse dock at the exact moment they are needed in the production process.
Which term refers to all the activities involved in making products goods and services for customers *?The overall activities involved in making products and services for customers is known as operations.
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