Sourcing Strategies

Make Strategic Sourcing Work in Your Organization

Procurement is a critical function in today’s competitive environment. And with the costs of purchased goods and services being more than 50% of sales at most companies, the stakes are huge. So often, the focus in strategic sourcing is simply on how well negotiations have been conducted. Don’t get me wrong, it is very important to have a good negotiation strategy and to capture your fair share of value in negotiations. But the key to longer term and lasting value starts with well thought out category sourcing strategies. I have seen too many situations where the procurement group runs from one RFP to the next, never seeming to get the breathing room to think through what they are trying to accomplish in a specific category and as a consequence, miss big opportunities. Thinking through that strategy, with the deep involvement and input of the appropriate internal stakeholders, will provide the roadmap and framework for all the work that will follow. This will provide greater results, reduce unnecessary false starts and decrease the time to value creation.

Working with your stakeholders helps you align with their goals and objectives and often identifies areas of need or dissatisfaction with the current supply base. It also allows you to spend time understanding the rapidly changing dynamics of the spend category/industry that are so critical as you prepare to go to market. Coupled with a good internal spend diagnostic, you are ready to think through the appropriate category strategy to meet the future needs of your business. And then subsequent RFP’s will have the structure and direction to be successful.

I have seen so many situations where purchasing is done without the assistance and involvement of the procurement group, and the negative impact on the organization can be staggering: a supply base that is far too large for the business with no leverage over common areas of spend, contracts that expose the company to incredible risk and don’t have appropriate out clauses, and the selection of suppliers who are not qualified to do the work and expose your company to significant risk. This is often the result of not having robust sourcing strategies or a good purchasing policy that makes it clear what the respective roles are in purchasing and with your internal clients. If you would like help in creating impactful strategic sourcing strategies and creating more value for your company, contact AES Consulting at 609-306-8176 or use our online form.