Introduction to Strategic Sourcing

Effective spend management begins with effective strategic sourcing. Strategic sourcing, simply put, is an institutionalized process where companies continuously improve their third-party purchases by reevaluating the specifications of their requirements and conducting a competitive bidding to achieve the best market prices for the goods and services that they buy. Aside from the internal process efficiencies that corporations could achieve by standardizing their requirements, strategic sourcing also facilitates to developing the overall spend structure of the category being sourced and identifying potential savings that could be realized once the contracts have been established and monitored.

A lot of companies all over the globe have employed (and benefited from) various strategic sourcing initiatives to manage their spend across a diverse array of categories such Raw Materials, Travel and Entertainment, Third-Party Services, Packaging Materials, etc. While each spend category would present varying strategies depending on the scope and opportunity, any company can run successful strategic sourcing projects by implementing the following steps:

1. Opportunity Assessment and Baseline Development

2. Supplier Outreach and Assessment

3. Requirements Identification and Request for Proposal (RFP) Development

4. Competitive Bidding

5. Awarding of Business

The success of any cost or spend management initiative begins with the correct execution of a strategic sourcing . We will go into each of the steps in the following articles.

– Jules Falzado, Senior Process Consultant, ECCI


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