Strategic sourcing is a collaborative and holistic approach to supply chain management that uses fact-based analysis to acquire the organization’s current and future needs at the lowest total cost of ownership (TCO) and risk.
This concept causes the purchaser to focus on the needs of the entire organization, rather than just the current needs of one area. For instance, focusing on fully understanding your own value proposition as well as the end customer’s needs and procurement processes, market conditions, and supplier capabilities to achieve the company’s overall, broader goals.
It's about leveraging your position to find the best value supplier.
It’s about leveraging your position to find the best value supplier or offer the best value solution within the marketplace. That is, your ability to improve quality, pricing and contract terms to suit your organization’s and your customer’s larger goals. Over time, the process creates a cycle of continuous improvement in quality and contract terms between the purchaser and supplier, leading to increased efficiencies in both parties.
In many instances, especially in the case of SMEs where there is not always excess time in making sourcing decisions, these decisions are heavily based on cost and delivery schedule. This process is mostly reactive to the organization’s immediate needs and often doesn’t take broader goals into consideration.
The cost and delivery from the supplier is just the tip of the iceberg
From the perspective of strategic sourcing, the cost and delivery from the supplier is just the tip of the iceberg. The approach is meant to take into account the total cost of the procurement as well as future opportunities, including internal processes, demand drivers, procurement practices, specifications and operational procedures.
Ultimately, any organization even if they are a supplier or SME can gain a competitive advantage by utilizing strategic sourcing processes. These advantages can include cost savings, increases in quality, and access to new suppliers. In the instance of Canadian SMEs, strategic sourcing practices can be used to ensure that your company is offering the best value solution through an efficient and competitive supply chain.