For a business to become successful, it is essential for it to expand its performance. The sourcing of services and products from the distributors have taken an important place in the industry. Strategic sourcing is a great way for the professionals to optimise the cost of their products or services without compromising on its quality. To accomplish this, one has to put in a lot of effort. In this article, we have shared all the necessary steps that will easily help you understand the strategic sourcing process.
1. Understand the category:
The first step of the strategic sourcing is usually handled by the procurement team only. In this stage, the team has to know everything about the category. This includes understanding what type of services and products are being sourced. the size of these products, the processes used for their production, and the quantity of products produced. The team must also know about the users and where they are located. All the information must be sorted, so that it won’t be difficult for them to do the analysis.
2. Analysing the supply market:
The main objective of this step is to identify the global and the local suppliers. If you want to have a clear view of different opportunities and risks, then you have to analyse the trends and dynamics of this marketplace. Analyse the cost of the raw materials and other elements like transportation and labourers. You should also try to find out the alternative for the current distributors or suppliers. Once all the data is collected, you have to run a survey to determine the capabilities of the supplier.
3. Developing the sourcing strategy:
The next step is to develop the sourcing strategy. Remember, that in this stage you have not selected any supplier yet. The main purpose of this stage is to outline the qualification criteria that can help you to narrow down your list of suppliers. This will assist you to determine from whom you will be buying the services and products to reduce the cost and risks related to it.
If you do not want to find a new supplier, then there is another option for you. You can also consider re-negotiating with the currency distributor to cut down the costs. The sourcing strategy that you have chosen must be able to fulfil the requirements of your business. If the requirement is to manage the live chat box on the website, the Outsourced Live Chat Service can be opted by hiring third-party customer service agents to handle the Live Chat support process. We suggest that this step should be taken into consideration by the cross-functional team with all stakeholders and not only the SMEs (Subject Matter Expert) and the end-users.
4. Select an appropriate sourcing process:
Once you have identified the criteria that must be met by the suppliers and narrowed down the list of suppliers, it is time to take the next step where you will solicit bids. The most common ways that are used to prepare the bids include RFOs ( Request for Quotes) and RFPs (Request for Proposals). If your business uses the RFP method, then a document is prepared that contains all the information like the product specifications, breakdown of prices, legal terms, financial terms, and evaluation criteria.
5. Selecting the supplier and negotiating:
Now we have come to the stage where you will select the supplier and negotiate with them. The procurement team will check every response they have received through the RFP method and will identify which supplier is suitable for your business. The team has to fetch all the information about the supplier. To do this, they can interview them or simply ask different questions.
The team will start negotiating for the better deals once they select an appropriate supplier. It is necessary for the team to have knowledge about your products and services, so that they can ask the right questions to the suppliers. Strategic sourcing is the best way to make your business cost-effective.
6. Communicating and implementing:
Once you have selected the supplier and the negotiation is done, it is time to implement the strategy. The suppliers must know all the steps regarding the implementation process. It is very important for you to be transparent with them, so that they can understand the strategy in a better way. You can discuss the implementation process by scheduling a meeting with the suppliers. This will also help you to stay up-to-date with the changes made in the process.
7. Benchmarking:
People often underestimate this stage of the sourcing process, but let us tell you that it is a crucial step that you should not miss. This step will help you identify how effective your sourcing strategy is. Ask yourself whether the business has been able to achieve its desired outcomes through the strategic sourcing or not.
For the benchmarking process, it is essential for the procurement team to measure the performance of the distributors over the time. Measure results at each stage to ensure everything is running according to the plan.
What is the importance of strategic sourcing?
Adopting strategic sourcing plans can be very beneficial for the businesses as it helps in reducing the costs without compromising on the quality of services and products. It also helps in minimising the risks and increasing the efficiency of the businesses. The process involves selecting the supplier that is best suitable for your business and fulfilling your requirements at a lower cost by negotiating with them. It also helps you in building a strong relationship with the distributors all over the globe.
To Sum Up
Every business wants to generate high revenues by selling good quality products and services. But how can they achieve this? To generate high profits, they have to look for multiple ways that can help them to reduce the cost of the business. Once such an excellent way is strategic sourcing that helps businesses to optimise the cost.
It can be complicated for you to understand this process initially. But once you study about it in detail, everything will become easier. Check out the above mentioned steps to understand the strategic sourcing process in the best way possible.
