Strategic sourcing, at its core, is about taking an organized approach to align your vendors in a way that drives the most value from those vendor relationships.
It requires taking a holistic approach to building a portfolio of vendors that can support current and future business needs. It also incorporates the necessary standards, processes and systems to get the best results from those vendors.
When strategic sourcing is done well it results in four things:
Higher Quality Vendors
Taking a process-driven approach to sourcing goods and services always results in working with better vendors. Better vendors operate more efficiently, create fewer problems, and consistently provide higher-quality goods and services.
Many vendors provide operation-critical goods and services. If they fail to deliver it is not only costly, it can be detrimental to your organization. Creating a strategic vendor portfolio mitigates operational risk, and ensures you have contingency plans in place should you have a vendor failure.
Working with a group of high-performing vendors dramatically increases the likelihood of getting what you pay for. Resources spent on under performing vendors are wasted resources. When an organization is more strategic in building its vendor portfolio, it is significantly more likely to get the results it expects.
Buying more strategically enables any organization to better leverage its buying power from a smaller number of vendors. This not only provides better pricing, it eliminates the additional time staff spend to manage multiple vendor relationships. This includes time-intensive activities like research, ordering, problem resolution, and invoice approval/payment.
Better pricing + less time to manage the relationship = lower total cost.
With so much to gain (and to lose), taking a strategic approach to sourcing is just good business. It enables you to:
work with vendors of the highest quality,
reduce risk through more process-driven sourcing,
eliminate wasted time and resources, and
procure goods and services at the lowest possible total cost.
Tom is Founder & CEO of Vendor Centric. He writes and speaks frequently on the topics of procurement and vendor management. Connect with Tom on LinkedIn or drop him a note at firstname.lastname@example.org.
Vendor Centric specializes in helping organizations create and mature the policies, procedures and systems they use to manage their important vendor relationships. Learn more about our vendor management software and services.