Drive profit, reduce risks, and optimize outcomes with strategic sourcing.
How do you transform your procurement department from a cost center to a profit center? Strategic sourcing. Vendorful allows you to turn your strategic sourcing culture into actionable processes. Our tools empower procurement departments to maximize supplier value in record time.
In a single sentence, “Strategic sourcing is the process of analyzing what products and services a company purchases, from which vendors, and at what volume and price.”
But if knowing is half the battle, executing on that actionable data is the other half. Strategic sourcing is the secret ingredient that modern businesses leverage in their procurement processes to balance the quality of goods and services they purchase with their costs. But it’s not merely transactional. In fact, some procurement departments think of strategic sourcing as a culture or a set of guiding principles. This spans the full supplier life cycle and involves ongoing analysis to optimize external spend against the goals and needs of the organization.
Want to build an effective strategic sourcing culture? You need to ensure that your procurement team can focus on continuous improvement of its suppliers and supply chains. By leveraging strategic sourcing software, teams reduce the noise created by manual procurement processes, allowing them to focus their time and energy on what really matters — driving optimization. Absent the right tools, key procurement team members spend countless hours copying and pasting data in spreadsheets and engaged in endless email threads. By freeing up your procurement personnel from “busywork,” firms increase their value and impact.
If you haven’t yet shifted your mindset, it might feel counterintuitive to think of your strategic sourcing investment as a cost saver. After all, how much money could it really save you? The answer is a lot. When you invest in strategic sourcing, you are taking the first key step to identify and select suppliers that will provide the highest value (at the best price) to your business. With deeper insights into your supply base, you are able to make informed decisions about which vendors you choose. The typical organization has as many — or more! — vendors than it does employees. Strategic sourcing practices allow firms to optimize their supply bases, delivering a measurable edge against their competitors.
A sourcing event is like dating. The buyer connects with a bunch of potential suppliers, narrowing the pool until the right one is identified. This is a magical moment for buyer and seller alike, consummated with the signing of a contract that binds each one to the other. But like a marriage, the buyer-supplier relationship takes works. Although there is typically a hand-off to the business unit that will be engaging with the vendor, procurement’s job shouldn’t end there. Indeed, from the moment a supplier contract is signed, effective strategic sourcing means monitoring KPIs by collecting qualitative feedback from stakeholders and quantitative feedback from systems. In doing so, you can nip any performance problems in bud, strengthening your relationship with your suppliers. Having a shared emphasis on continuous improvement and the sustainability of the supply chain serves to improve outcomes and the overall success of your interaction with the supplier: a “win-win.”
A strong strategic sourcing culture focuses not only on increasing value, but on reducing risk. This risk usually falls into two categories. The first is internal risk, which arises when colleagues don’t follow the firm’s processes in engaging with a supplier. The second is external risk wherein the supplier fails to comply with the buyer’s requirements or is otherwise compromised. Effective strategic sourcing initiatives should layer a firm’s best practices on top of processes as well as ensure that vendors are assessed for risk on an ongoing basis.
As the age-old saying goes, time is money. When you adopt strategic sourcing and support it with the proper tooling, you reduce human error and non-compliant spend while realizing increased speed and consistency. This is both critical and valuable for your bottom line because reducing the amount of time that goes into a task makes it less expensive in the long run. In fact, the return on investment is quite significant; the Hackett group pegs world-class ROI (i.e., the ratio of total purchase cost savings to the total cost of procurement) at 9X return on investment. The costs of not having a world-class procurement infrastructure are equally consequential. A well-intentioned procurement team that continues to rely on spreadsheets, documents, and emails is likely doomed. Manual processes slowing them down, damaging supplier relationships, and eating into your ROI. World-class teams need wolrd-class tools.
At Vendorful, we engineer products so that you don’t have to. While we can appreciate the creativity of some of the solutions we’ve held together by chewing gum and baling wire, we strongly believe that procurement departments should live outside of Excel spreadsheets and lengthy email threads. That’s why we’ve turned the RFX process into a self-contained, point-and-click experience.
Strategic sourcing is a procurement methodology used to help companies scale globally to meet rising consumer demands and differentiate themselves from their competitors. The best part about strategic sourcing is that it can help your company – regardless of industry.
When it comes to strategic sourcing, the ultimate goal is to drive value for the organization. If you want to learn how “Procurement = Profit,” schedule some time to talk to a member of our team or read the articles below.
Cindy Chadderton, Strategic Sourcing Category Manager – IT
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