SUPPLY chain disruptions continue to cause considerable scrutiny to current sourcing strategies, testing organisational and human resilience in unprecedented ways.
The economic ground remains subject to rapid shifts. Intense competition in all industry verticals is neither coincidence nor bad luck.
A growing body of anecdotal evidence seems to suggest that the only way out of this quagmire is to look at the familiar in an unfamiliar way. Supply chains will need to come up with innovative strategies to survive amid increasingly fluid industry dynamics.
Organisations that are failing to implement strategic sourcing happen to be throwing away value through the window. Where cost saving opportunities remain elusive, it may be important to pursue other value-addition strategies.
Such value-addition strategies can assist supply chain professionals to sidestep an array of supply chain disruptions and challenges.
Supply chain industry leaders must be seen to be searching for new and better ways to compete in highly competitive business environments. Organisations will need every edge they can get to compete at the highest level, contributing significantly to supply chain speed and scale.
Strategic sourcing should not be used to just focus on the present. There is renewed emphasis to use such strategies, which are future focused, with a view to build supply chains that win against the best of the best.
This will enable organisations to gain a leg up on competitors in a highly-volatile business arena. Realisation of this emerging reality has resulted in the increasing adoption of strategic sourcing.
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There is a growing chorus of voices for the continued use of this highly valuable procurement strategy. The demand for impactful strategic sourcing has stood the test of time and continues to be highly regarded, having found its mark and value in unearthing novel ways for realising cost savings.
Most firms recognise the value of strategic sourcing as a key lever for driving efficiency and reducing total costs. Recent trends and a confluence of factors point to a growing focus on its adoption in industry and commerce.
Strategic sourcing will always seek to align sourcing activities to the overall goals and objectives of the business. It will promote the supply chain department to align its purchasing power with the overall value proposition of the organisation.
This sourcing strategy is designed to support the core of the core through active collaboration with top-tier suppliers to spur leading-edge innovation. The supply chain ecosystem must be seen to be highly efficient and extremely global in reach and multi-layered in scope.
The hallmark of strategic sourcing is to achieve the lowest total cost of ownership while reducing the supply chain risks in the ecosystem. The idea is to regularly revisit and re-focus the business goals by analysing supply chain variables that require tweaking to ensure that the supply chain will always remain optimal.
It often takes the willingness to research and hunt down the best there is, with the intention of creating distinctive value. New white spaces of cost savings will emerge in the process. More often than not, the so-called small dollar valued supply chain findings can turn out to be multi-billion potential discoveries if strategic sourcing strategies are adopted.
Strategic sourcing will seek to create a more sustainable business environment in areas of cost, quality, security of supply, service provision and innovation. It will give considerable priority to performance metrics, supplier’s sustainability, flexibility and agility.
Sourcing strategy processes typically harbour a great deal of value because they determine spending patterns, define requirements for products and services to be purchased and structure relationships with suppliers.
Supply chain professionals will seek to underpin and compliment strategic sourcing with other value addition strategies with a view to create optimal business outcomes.
This will assist in the identification of new product opportunities bringing value-add capabilities and novel industry competencies. This will give procurement personnel enough bandwidth to concentrate on the bigger picture.
With that promise, strategic sourcing is moving to the forefront of business strategy in many industries and capturing the attention of senior management.
Strategic sourcing requires supply chain professionals to carry out an in-depth analysis of what an organisation buys, from whom, at what price and at what volume.
The in-depth analysis will, therefore, be directed at variables such as purchase volumes, expenditure by supplier, expenditure by category and expenditure by division. Procurement is very much a numbers game.
The greater the volume, the greater your leverage in terms of price, payment terms and delivery terms. This will truly bring into focus economies of scale that can help reduce piece costs and spread-out fixed capital outlays.
It is critical because economies of scale and scope often yield a decisive competitive cost advantage. A competitive pricing structure is a gentle gift from strategic sourcing.
There is also a lot of emphasis on the entire life cycle cost of a product, not just the initial purchase price. Strategic sourcing works best with the concept of category management where spend is classified into categories based on the importance of the product or service to the organisation.
Such a sourcing approach will analyse and decide on supplier partnerships based on the relevance and impact of the supplier on organisational sustainability. Those supply chain partners or service providers that are best poised to assist the business in retaining a competitive advantage should get that extra recognition.
Strategic sourcing recognises that suppliers are critical value partners with the capacity to build a sustained and collaborative business partnership that will last a distance. If supply chain personnel want to enhance collaboration with their suppliers, they must get them involved early in the procurement process and share notes with them about what they intend to do and why.
It may also be important to ask for their advice on how they are assisting other customers. Applying their collective experience and intelligence, strategic sourcing relies heavily on collaboration which recognises that suppliers are a source of best practice knowledge.
Leveraging that wealth of knowledge in the creation of market winning products is the need of hour. Collaboration cannot exist unless the parties first regard their relationship as long term and mutually beneficial.
Strategic sourcing should be seen to be establishing that foundation in order to generate perfectly aligned supply chain objectives. Weaker supplier collaboration translates into lower vested interest in joint problem solving.
Long-term collaboration partnerships will encourage both parties to invest in new facilities and advanced technology, creating a sense of shared benefits that fosters a long-term partnership.
Strategic sourcing offers a platform where it is easier to create and maintain a strong bond by integrating the collective knowledge and intelligence of partners.
However, it is also important to ensure that the balance of dependence will not become lopsided at implementation.
The creation of a long-term focussed business relationship with suppliers must be based on trust and depth of mutually beneficial values. Trust is the invisible currency that fuels collaboration success.
Strategic sourcing is, therefore, not just about finding the right suppliers; it is about building meaningful long-term relationships while tapping into the expertise and knowledge to drive innovation. It is a default approach to get things moving, cementing a shared commitment to a sustainable future.
The value of strategic sourcing comes in many forms to include keeping an open heart for other supply chain partners’ viewpoints, cost savings, supply chain process improvements, access to new markets and innovative insights that lead to product enhancements.
Strategic sourcing tends to be proactive with the ability to sense, flex and adapt, promoting continuous improvements efforts.
This strategy also encourages the selection of suppliers based on their compatibility with the organisation’s goals rather than short-term price benefits. The other often spoken benefit of strategic sourcing relate to quality enhancement, supplier responsiveness, realisation of the lowest total cost of supply, speed to market, sustainability and supplier’s willingness to share risks and rewards.
Strategic sourcing not only enhances operational efficiency, but also positions business to adopt to market dynamics through joint problem solving, innovation and continuous improvement.
It also enhances the opportunity to offer unparalleled visibility into industry trends with a view to capture the hoped-for gains in service delivery and excellence ensuring organisations to stay in sync with market and customer needs. It is easy to see why this strategy is not a bad idea at all.
In conclusion, it must be noted that the unprecedented scale and scope of disruptions in the supply chain business environment will continue to keep procurement professionals awake at night.
Strategic sourcing efforts no matter how good, may often fail to measure up to expectations unless and until procurement leaders are prepared to demonstrate further commitment through both speech and action.
Most procurement leaders are finding it very difficult to bring this logic into practice. The requirement to walk the talk comes down to the adoption of a robust strategic sourcing approach which has recently received a spike in attention given the current magnitude of supply chain disruptions.
As with everything else, there is no single approach that works best for every situation. The key is to analyse the peculiar circumstances of your business and choose what works best. As with many things in life, one size does not fit all.
It is important to get the basics right so that your supply chain can stay ahead of competition in this highly-competitive business environment.
In order to pursue a solid trajectory for future growth, supply chain professionals are required to adopt strategic sourcing with enduring enthusiasm, in a journey full of potential ups and downs.
It is a known competitive weapon in the arsenal of world class supply chains. The default starting point for all procurement process flows should be strategic sourcing.
As the adage goes, in this case, an ounce of strategic preparation is worth a pound of cure. It can easily make the difference between a red or black bottom line. Every supply chain professional will find the lure of efficient strategic sourcing difficult to resist.
Its profound importance is widely acknowledged. It is not just good business practice. It is undoubtedly a fundamental strategic imperative to up your game.
- Nyika is a supply chain practitioner based in Harare. — [email protected].
