SCM-Supply Chain Management Strategic Sourcing

Supply Chain Management Strategic Sourcing-SCM Blog-05

Supply Chain Management Strategic Sourcing can be defined as a collective and organized approach to supply chain management that defines the way information is collected and used so that an organization integrates its consolidated purchasing power to find the best possible values in the market To take advantage of
We cannot construct the importance of operating in a collaborative way. Over the decades, the understanding of the purchasing agent has seen a major change in the supply chain profession, where it was the criterion to remain in stock, working with location teams around is critical, for achieving success.
Strategic sourcing is conducted due to some method or process requirement. This is collective because one of the most essential requirements for any successful strategic sourcing effort is to obtain operational components other than procurement engaged in decision making and evaluation process.
The process of strategic processing is a step by step approach. There are seven different steps involved in the process of strategic processing. These steps are briefly explained below.

Understanding spending 

The first three steps involved in strategic sourcing are carried out by the sowing team. In this first phase, the team needs to conduct a complete survey on total expenditure. The team ensures that it accepts the aspect in relation to the expenditure category. The five major areas to be analyzed in the first phase are as follows;
  • Complete past expense records and volumes.
  • Expense divided by items and sub-items.
  • Expense by division, department or user.
  • Expenses by supplier.
  • Future demand estimate or budget.
For example, if the packaging is routed in the classification customer goods company, the team has to accept the reason behind the specification of the classification, application pattern and specifications specifying the specific types and grades.
Stakeholders are to be determined at all working units and physical locations. Logistics, for example, requires an updated report about transportation specifications and marketing requirements to accept certain quality or environmentally applicable facilities.

Supplier Market Assessment

The second phase involves frequent evaluation of the supplier market to chase substitute suppliers to present suppliers. A thorough study of supplier market dynamics and current trends is done. Cost should be the key element of the design of major products.
Along with this, an analysis on the sub-level market of major suppliers and examination for any risks or new opportunities is also important.
Now, it is not recommended to do a cost-of-cost analysis for each item. There are many examples where conservative strategic sourcing techniques work better.
But in cases where the application of strategic sourcing is not applicable, cost analysis provides a valuable tool that minimizes supplier costs and regular progress efforts.

Supplier survey

The third step is developing supplier analysis for both existing and potential option suppliers. This analysis helps in examining the skills and capabilities of the supplier.
Meanwhile, data collected from existing suppliers is used to verify expense information that is from suppliers’ sales systems. The survey team considers the above fields for the information gathered. The areas are as follows:
  • Feasibility
  • The ability
  • Maturity
  • The ability
Helps in examination of market potential and skills to meet customer demands to ascertain whether the proposed project is viable and can be delivered by the identified supply base.
This analysis provides initial due diligence to market customer demands and enables suppliers to think about how they will react and meet demand. The motto here is to motivate appropriate suppliers with the appropriate structural layout to respond to the expenditure of demands.

Build strategy

The fourth phase involves the creation of a sourcing strategy. The merger of the first three phases supports the elements required for the sourcing strategy. For each region or category, the strategy depends on answering the questions below.
  • How ready is the market to resist the supplier?
  • How helpful are customers of a firm to test existing supplier relationships?
  • What is the competitive evaluation option?
Typically, these options are selected when a purchasing firm has little profit on a supply basis. They will rely on the belief that suppliers will share the profits of a new strategy. Thus we say that the sourcing strategy is a collection of all the drivers mentioned so far.


This step is about selection and negotiation with suppliers. The sourcing team is advised to apply its estimation constraints to the responses generated by suppliers.
If information in the range of RFP response is required, it can be easily asked. If done correctly, the disposal process is first conducted with a large set of suppliers and then listed in a few finals.
If the sourcing team uses electronic negotiation tools, a large number of suppliers can maintain them in the process for a longer period, giving more extensive suppliers a better chance of winning the enterprise.

Communication with new supplier

After informing the winning supplier, Hai should be invited to participate in executing the recommendations.
The execution plan varies according to the scale of the supplier’s switch. For mandatory purposes, a communication plan will be established, including any modifications to specifications and improvements to the delivery, service, or pricing model. These are also communicated to users.
As we know, the company benefits greatly from the whole process of communication planning, makes some modifications as per customer demand and passes it forward to the customer. It is necessary that this process should be accepted by both the company and the supplier.
For new suppliers, we need to prepare a communication plan that competes with the change from old to new at every point in the process associated with the spending category. The departments impacting this change are Department, Finance and Customer Service.
In addition, the risk antenna will be particularly sensitive during this period. During the first weeks of performance it is necessary to closely gauge the performance of the new supplier.

Another essential task is to understand the intellectual capital of the sourcing team, which has been developed in a seven-step process, so that that category can be used next time.

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