It’s time to put some more strategy into sourcing
Traditional procurement, with its undue and short-term focus on price and quality, has been bogged down by uncertainties like longer project durations, broken processes, and, most of all, quality issues. It is short-sighted in the extreme when it comes to price negotiations, and before the parties at the negotiating table realize it, relationships would have turned adversarial. The bad start itself can ruin the day, and the burden this place on an organization’s human and financial resources is understandable. Procurement strategic sourcing seeks to reverse the blocked arteries of traditional procurement by addressing issues weighing down supplier onboarding and slowing process flows. With a metrics-centered no-nonsense approach, strategic sourcing cranks up the conventional procurement machine by identifying opportunities so far missed for cost savings. By so doing, it ensures better alignment between inventory procurement and customer demand on the ground.
By taking in a detailed view of what organizations are spending money on, procurement strategic sourcing consolidates demand from multiple buyers. Large order quantities and, furthermore, consolidation of organizational spend with a smaller preferred base of suppliers will help procurement teams to positively influence the other side (namely, suppliers) at the negotiation table. This leads to windfall gains by way of lower per unit purchase costs, payment terms, (e.g., installment plans), discounts, and whether the price is inclusive or exclusive of taxes.
Go the extra mile with procurement strategic sourcing
By the way, there is a lot more to gain from procurement than that initial purchase price. Read on to find out more about how you can stay on top of your procurement spend and derive long-term value with strategic sourcing.
Reduce risks to the smallest possible level
By falling back on a rigorous process of identifying multiple suppliers, procurement strategic sourcing spreads purchase orders across a diverse supplier base, thus pooling and minimizing risks. Furthermore, the supply lines thread through different geographic regions and countries. So, if a couple of suppliers are overrun by risks (be they geopolitical, industrial strife, or economic turmoil), the chances of business operations coming to a standstill would be minimal. The other way strategic sourcing works to curb risks is by ensuring better line of sight into suppliers’ efficiency, adaptability to dynamic market shifts, as well as ability to deliver with high quality and at attractive price points. These supply chain KPIs are automatically gathered from ERP systems or via procurement software, or standalone spend management tools.
Build trust with suppliers through open dialogue
With procurement strategic sourcing, supply chain participants will never feel scared, weak, or clueless. Why would supply-side entities feel hopeless when they have a steady stream of easy-to-understand information on market shifts, changing customer demand, and quality standards? They would also be the first to know about changes to processes, systems, and activities. In a “strategic sourcing collective,” a business and its suppliers are like the first among equals, working collaboratively toward a shared goal, sharing the secret recipes of success, and agreeing further to equitably split the rewards of success.
Achieve strategic cost savings (as different from cutting costs)
This is different from simply slashing costs for the sake of it, which very often ends up missing the forest for the trees! Procurement strategic sourcing takes a macro perspective of organizational spending. It’s more about consolidating and centralizing spending and using that power of scale as a negotiation lever with influential suppliers to extract better price points, terms, and bulk discounts. By proactively embracing procurement automation, businesses can see the big picture of corporate spending, reduce direct costs, as well as gain visibility and control over maverick spend.
How SpendEdge can help you
Our experts in procurement strategic sourcing perceive the intricacies of supply networks and are quite knowledgeable when it comes to conducting regular evaluations of complex supply-side logistics systems. Through such timely assessments, our procurement professionals enable clients across industries to identify and eliminate wastages and gridlocks in the supply chain. This enabled businesses to realize cost savings and make measurable efficiency gains. To this end, our specialists work with client teams in procurement strategic sourcing to make the most effective use of routes, reduce shipment costs, and ensure goods reach their destination faster. Our teams provide clients with advance alerts on suppliers’ performance efficiency and unplanned events, which could potentially play spoilsport with their product delivery chain and cause businesses pecuniary loss and damage to their good standing. With our timely and thorough-going insights, over the years, businesses have successfully fashioned lean-and-mean supply chains, leading to significant margin growth and efficiency gains.
Our experts in procurement strategic sourcing leverage their arsenal of in-depth market knowledge and benchmarking expertise to secure highly competitive pricing deals for clients. At the same time, they exercise utmost care to ensure service quality standards at all times. In addition, our risk mitigation center of excellence helps clients anticipate potential sourcing challenges and build strong contingency plans to effectively deal with crises scenarios.
A steel business embarks on a new era of procurement strategic sourcing
Our client is a key player in the global steel industry with operations spread across several geographic locations. As is characteristic of businesses in the sector, our client has also been pursuing the inorganic route to access new markets and technologies. Merger and acquisition (M&A) can be a great growth strategy but, on the flipside, businesses often inherit legacy processes and, in this case, convoluted procurement systems. Many of these acquired systems lacked universal item codes and making sense of their disparate IT infrastructure was a major pain point. Moreover, a string of suppliers was added into the M&A bargain. The steel business soon realized the need to streamline procurement processes, eliminating unnecessary steps and unifying the procurement system, to drive more productivity. The steel industry participant turned to our experts for strategy support. For context, our specialists at SpendEdge have a history of success in end-to-end procurement strategic sourcing — all the way from design through implementation.
The client wanted our teams to press ahead with an ambitious plan to improve cost savings by way of direct as well as indirect (e.g., maintenance, repair, and operations, MRO) spend. Our experts set to work, and their data collection included a balance of direct and indirect methods as well as numerical and non-numerical approaches. With our strategic sourcing, the client was able to uncover enterprise-wide opportunities for cost savings and straighten out processes, eliminating redundancies, bottlenecks, and inefficiencies. Consolidation of the supplier base has helped the business nurture long-term relationships with a few critical-to-business suppliers.
Spend analytics has moved center stage, which is the other major change, and this is enabling the client to segment and prioritize vendors to reduce transactional and purchase costs while curbing risks. At the same time, through better management of similar or related product categories, the client has succeeded in nurturing stronger vendor relationships and driving efficiencies across the supply network.
