Traditionally, sourcing was about identifying a supplier’s potential and checking whether it can render to the company’s requirements. It was the most efficient and economical solution but only until 2020. The COVID-19 pandemic and the global lockdown changed the traditional norms drastically. Companies started to face challenging situations coping with the disrupted supply and demand chains. They needed solutions that could help their businesses from suffering miserably. And that is where ‘strategic sourcing‘ came to take the lead.
What Does the Term Define?
In simple words, it is a process of developing supply channels, i.e., a procurement process that goes beyond traditional methods. Sourcing strategically is about taking into account different elements like data collection, spend analysis, market research, contracting, and so on. It is crucial to companies today because it allows them to consolidate their purchasing power in such a way that it helps the business achieve the supply channels at the lowest total cost.
How Does a Strategic Sourcing Company Build a Strategy?
To build a solid strategy that will meet your company’s sourcing needs, the service provider company will evaluate the existing scenario. Based on that, it will do the following things –
- Analyze spending patterns: The service provider company will do detailed research to evaluate and analyze your company’s spending patterns. The result will give them an idea of where to improve more.
- Validating project requirements: The sourcing company will evaluate your business to understand if you need a new supplier for any project in hand. The company will also determine whether negotiations with an existing supplier will solve the requirement.
- Strengthening supplier relationships: The company will work closely with your existing supply chain to determine how healthy the business relationship is. The sourcing company will work on improving that relationship to help your company deal with upcoming projects.
- Data collection: The strategic sourcing consulting company will collect some essential data to help them shape a strategy. The collected data includes existing supplier contracts, work statements, market analysis, spend analysis, etc.
Based on all these things, the company will build a strategy that suits your target project. In some cases, they will also provide risk avoidance solutions.
Monitoring Supplier Invoice Setup
Sourcing companies help brands monitor the invoicing process once new suppliers have onboarded. New contracts that generate huge invoice volumes must be tracked and monitored. Sourcing companies perform that job by –
- Checking whether receiving goods is done within time restraints.
- Check if the products are of high quality.
- Ensuring that the customer service stays optimum.
- Tracking that the invoice provided by the supplier matches with the right amount of goods/products.
- Determining how responsive the supplier is to your company.
- Keep in mind that the stock availability never ceases.
Can Strategic Sourcing help in Price Benchmarking?
For most businesses, price benchmarking is a complex process. It is because most competitors do not have a transparent pricing strategy. Therefore, knowing what suppliers are offering or what competitors pay for a supply chain is often hard to know. However, a strategically sourced solution does have an answer to price benchmarking.
- The sourcing consultant will ensure that your company understands if they are paying too much for any supply chain.
- With data and varied insights in hand, your company can empower negotiation based on those. They can either negotiate with the seller on an existing contract or plan a new one.
- With the pricing data in hand, companies understand if they are paying over the average numbers to their suppliers. In such cases, the company should consider working with a new supplier.
Working with a new supplier also ensures your company stays within its budget limit while getting the best value-for-money solutions.
Do Sourcing Strategies help in Cultivating Relationships?
Nothing comes as an alternative to identifying the best suppliers in the market. Companies that cultivate and nurture relationships with their suppliers are usually successful. But, that isn’t the only thing that these sourcing consultants do. Sourcing companies help develop solid business relationships with suppliers to meet costs, predetermined high-quality goals, and speed-to-market.
A strengthened relationship allows suppliers to figure out how to cater specifically to the requirements and needs more efficiently. Moreover, a healthy relationship with customer-friendly suppliers also improves customer satisfaction. In a way, it boosts your company’s PR among customers.
Final Words
Finding the right suppliers for your business is often tricky, especially for market newcomers. But, with the assistance of a strategic sourcing consultant, companies can quicken up the pace of the process. Besides bringing more cost-saving measures, the service provider will also guarantee that your company’s market reputation stays top-notch.
