Since businesses started to leverage the power of globalization, the world became one large market to both sell and procure goods as well as services from. With the advancement of technology and communication technology, more players have entered the arena and the competition has become fierce. To keep ahead in the race, therefore, the importance of applying strategic sourcing has become paramount. Strategic sourcing companies now play key roles in global procurement operations. Evidently, in the current market scenario, strategic sourcing skills play the most crucial role in maximizing the efficiency and business performances of any enterprise.
Strategic sourcing is a relatively new idea. It evolved as an organized, well-defined process only about 30 years back. Also, standalone tools that can automate some of the manual operations of the process came out even later. Therefore, many companies are yet to harness the full potential of strategic sourcing and utilize it to their advantage. Especially in today’s time, when the market has widened to an unprecedented geographical expansion and the supply chain risks are exceptionally higher, the sourcing strategies must be more efficient than it was even before. An effective way to actualize this is by grasping how the top companies are conducting their procurement operations and developing further strategies built on the best practices. To help you with the task, this blog gives you an insight into how the top companies are managing strategic sourcing and how you can utilize the same for your business.
Key Objectives of Strategic Sourcing for Large Companies
Essentially, strategic sourcing is an institutional, iterative approach to supply chain management. It is the process of recognizing the supplier base as well as the spend profile of a company and aligning them to ensure that its business requirements are addressed properly. The key objectives of strategic sourcing, however, are manifold. To mention a few important ones:
- To establish a sound, fail-proof framework that will help improve the technology, quality, and service of the goods or services that the company consumes
- To develop capabilities and tools that will effectively improve visibility and transparency into those goods and services
- To develop standard templates and agreements between the suppliers and the consumers
All the top companies, irrespective of their offerings to the customers, try to uphold these objectives in their practice of strategic sourcing management. Over time, the advantages of these practices have compounded to provide a competitive posture that has helped them to prosper and innovate. These advantages, nevertheless, go beyond mere cost saving and revenue growth and result in achieving breakthrough innovations and improved productivity.
Stepping Up with Spend Management with Strategic Sourcing
For any successful sourcing strategy, accurate and real-time information on the spending pattern of the company is essential. Most top companies are well-aware of the benefits of spend management. However, many of them are still using semi-manual methods to consolidate, refine, and reorganize spend data from different locations and departments. This eventually takes up a considerable amount of time and effort to get the spend analysis right and potentially compromises spend visibility that might lead to value leakage. Best-in-class strategic sourcing companies, on the other hand, know the importance of automating the whole process in terms of impacting their bottom-line profits and lowering organization spend. They are investing in complete automated solutions that would easily integrate with the existing ERP systems and transform all their key data into a single data set. This data set can further be analyzed and classified to support the entire supply chain management.
Taking Support from the Right Technologies
More companies are adopting innovative technologies to manage sourcing better. Over time, more CPOs have shifted their focus to invest in novel systems and integrating them into their existing systems. As a matter of fact, adopting new technologies has become the cornerstone of better strategic sourcing. However, the top strategic sourcing companies in the world are particularly focusing on the wider adoption of innovative digital solutions across the entire source-to-pay process. It has become apparent that the holistic and seamless operation, borne through automation and the utilization of digital solutions is able to create the most value for the companies. Consequently, they are replacing first/second-generation, hard-to-use systems with new cloud-based technology that are more responsive and user-friendly. Eventually, they are gaining more visibility into spend under management, total company spend and negotiated or identified savings.
Harnessing Supply Market Intelligence for Successful Sourcing
The success of strategic sourcing is not limited to cost management alone. Managing market risks is equally important for any company. Unprecedented circumstances like political upheavals, economic crises, policy change, or natural calamities can leave even larger enterprises vulnerable to significant financial loss or reputational damage. Despite the awareness of such vulnerabilities, many companies maintain a reactive, instead of a proactive approach, in dealing with these crises. On the other hand, the top companies leverage the power of supply market intelligence (SMI) as their topmost strategy for global sourcing. They are likely to invest in user-friendly, well-designed market intelligence solutions that analyze data accurately and reveal comprehensive sourcing insights. At the same time, SMI helps companies to monitor supply market conditions and enables them to address potential risk factors promptly and effectively. This way, they can proactively avoid crucial market crises even before they surface. Moreover, the right SMI across the entire spend category empowers enterprises to make more informed decisions concerning sourcing and procurement.
For all the top-ranking enterprises in the world, including those in the Fortune 100 and 500 lists, strategic sourcing has proved to be the most effective way of business growth and acquiring a competitive advantage. Accordingly, mid-market companies and small enterprises too can benefit from the proactive approach as well. Partner up with one of the best strategic sourcing companies to access the benefits of a world-class supply chain management and spend analysis and optimize your cost-saving and business growth. After all, in the age of digital transformation and globalization, the sky is the limit!