“….Do not go charging into the battlefield without a plan”
This is the fourth article in the series on Strategic Sourcing. In my previous article, I explored the subject of Supply Market Profiling, which is essentially the process of gathering supply market intelligence with a view to gaining an in-depth understanding and insight into the supply market from which the goods and services targeted for Strategic Sourcing are obtained.
by Emmanuel Nzombe (MCIPS / CIPP)
In this article, I turn my focus to stage three of the Strategic Sourcing process — Developing an Optimum Sourcing Strategy — to guide the acquisition of goods or services that meet business requirements.
One of the biggest errors of omission that Supply Management professionals can ever commit is to acquire business requirements without a defined strategy. The three-bid system, despite still being widely used as the default method of acquiring goods and services by many procurement practitioners, is far from a strategy. It is exactly what it is — a hard and fast rule applied as if cast in concrete without exception across all categories of business spend. Consequently, and quite expectedly, this yields only suboptimal value for the business. A Sourcing Strategy is a robust and game-changing blueprint that defines or redefines how the Supply Management professional will acquire the business requirements in question. Therefore, care must be taken to ensure that it is as practical as possible — even someone outside your business should be able to implement it.
The process of developing a comprehensive Sourcing Strategy invariably begins with synthesising the data gathered from the internal Spend Analysis as well as the Supply Market Profiling into a list of actionable insights about the product or category and the supply market. In a way, the Supply Management professional is basically asking him/herself: “What is all this information pointing to?” “What narrative is this information telling me about how the business is currently acquiring its goods and services, or how the supply market of the goods in question is organised?” “What gaps exist in how we are currently acquiring our business requirements?” “What opportunities exist in the supply market that the business can tap into or ‘siphon’ for even better value than what the business is currently getting?”
For stellar business results, this must be followed by identifying and documenting key value levers that the Supply Management professional can leverage to tilt the odds in his/her favor. Remember, Strategic Sourcing is not just about acquiring goods and services or securing the lowest prices. It is about acquiring supply market opportunities and capabilities that together form a truly “value-packed” deal for the business.
A robust Sourcing Strategy essentially helps the Supply Management professional answer crucial questions such as: “What is the most optimum way, and from where should we acquire our business requirements in the context of the insights from internal business and supply market analysis, as well as the key value levers identified?” “Should we go for a competitive sourcing method through consolidating our spend volumes or negotiating with one supplier?” “Should we opt for an internally generated solution (make) or outsourcing?” “Given the business’s strategic goals and priorities, what are the most ideal supplier capabilities that we should look for in the supply market?” “How are we going to select and evaluate the most suitable supplier(s) that best meet the business requirements?” “What is the most suitable supplier relationship that would deliver the most optimum value for the business?”
A Sourcing Strategy should therefore not be just a meaningless document that confuses people and ends up nowhere, but a robust, very practical, and game-changing blueprint that redefines how the business will acquire the requirements in question going forward. Care must be taken to ensure that it is not ironclad but has flexibility to be continuously adapted in line with changing supply market dynamics.
Views expressed in this article reflect the personal opinions and experience of the writer. Kindly send your feedback to [email protected]
