Table of contents
It is important to emphasize that strategic sourcing as described here is primarily applied to strategic categories and suppliers (see the Kraljic Matrix).
Strategic sourcing involves creating a (category) plan, building strong relationships with key people within suppliers, creating strong interactions/interfaces with these suppliers and actively managing the relationship.
The (category) plan is based on data analysis (market analysis, existing contracts, purchasing volumes, prices, delivery and quality performance, interviews with internal stakeholders, etc.), and is based on a thorough analysis of the market.
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The key foundations of strategic sourcing are:
- A deliberate category policy (one or more suppliers, etc.).
ability to build strong and long-term relationships with suppliers based on personal relationships at different organizational levels - Good contracts
- KPIs
And the main benefits are:
- Lower QLTC (Quality, Logistics, Technology, Cost) or TCO (Total Cost of Ownership) costs.
- Working closely with a limited number of suppliers, each supplier gets more volume during the contract period and can therefore offer better prices and terms
- Better quality: having these suppliers audited by a QA ensures that all processes are in place to ensure high delivery reliability and quality.
- Less risk: for example, if a supplier experiences a failure, a good relationship makes it likely that they will help find a solution.
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So, how do you create lasting relationships with suppliers?
- Invest in the relationship at different organizational levels
- Negotiate a clear agreement in which all interfaces between the organizations are well described and with clear KPIs for the supplier against which its performance can be properly measured.
- And regularly (annually?) renegotiate relevant parts of the contract, e.g., to improve collaboration/interfacing, find areas to enhance collaboration, etc.
- Managing the relationship well by measuring performance, communicating that performance periodically and diving deeper if it falls short
- Helping suppliers improve their processes, products and services, such as through audits to help them grow and become more competitive.
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Conclusion
Strategic sourcing is about building strong, long-term relationships with strategic suppliers and provides a number of benefits. It’s about working with them, investing in their development and making success a logical outcome of collaboration.
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