Strategic Sourcing: What It Is & How It Can Benefit Your Business

The optimization of procurement practices should be a key concern for any organization or business leader who is looking to grow and strengthen their supply chain. Effective supply chain management can cut costs, improve quality control and simplify business operations.

Strategic sourcing is often seen as the pathway to building a superior supply chain practice. Deployed by large corporates and small businesses alike, strategic sourcing has the potential to secure important developments in supply chain efficiency and create business partnerships that prove highly beneficial for both buyer and supplier.

In this blog, we’ll cover the essentials of strategic sourcing. Our eSourcing and procurement experts will look at what strategic sourcing is, what strategic sourcing can do for you, and how you can deploy your own strategic sourcing campaign.

Defining strategic sourcing

Strategic sourcing is a cyclical process. One key thing to know about it is that, if you’re doing it properly, you’ll never stop engaging in the practice.

It requires evaluation and re-evaluation of your procurement strategy, supplier onboarding process, contract tenders and supplier management activities. The overall goal of strategic sourcing is to optimize your supply chain to be as efficient as it can possibly be.

Typically, this would mean looking for ways to acquire the best resources available for the lowest possible price. However, supply chain optimization can go beyond pricing and look to other influential factors like supply delivery efficiency, long-term relationship development and the alignment of desirable supply chain practices, including sustainability initiatives or Environmental, Social & Governance (ESG) criteria.

The end result of strategic sourcing is to always be looking for ways to improve upon your procurement to perfectly align your supply chain with the business objectives, goals or targets you have at that current moment in your business lifecycle.

Strategic sourcing in practice

Strategic sourcing is based on looking at specific elements of your procurement process and enhancing said process to better benefit your business. This is often done within the acquisition of suppliers or contract management stage. By performing a continuous strategic analysis of market opportunities, supplier developments, changes to your industry and so on, you can start to improve your supply chain.

This is contrary to the ‘set it and forget it’ approach to sourcing. Instead of finding a supplier or group of suppliers that fit your present needs and continuing to use them well into the future, it has you evaluate how effective your suppliers might be and uncover better opportunities.

For example, strategic sourcing may help you:

Identify a great supplier you are currently working with that has developed new platforms for the supply of goods or services. For example, construction suppliers may expand the kind of services they offer. By identifying these new opportunities to source different contracts from a single supplier, you can streamline your supply chain and cut down on the number of suppliers you with, or;

You may find a supplier that used to be cost-effective is no longer providing you value with their services, or;

That you can find higher quality services elsewhere, or;

While your suppliers appear strong on the surface, underneath they lack the risk management support structures necessary to protect your business against potential procurement problems. This is especially true regarding the COVID-19 pandemic. During these unprecedented times, supply chains are being tested as they never have before.

By identifying problems or opportunities, you can make changes.

The benefits of strategic sourcing

There are myriad benefits to the process:

Reducing costs – Strategic sourcing helps you analyze your supplier market and find ways to lower costs, whether that’s direct cost savings through reductions in supplier pricing or finding more efficient supplier processes that save on operational expenses.

Simplify procurement – By working to improve the way you procure resources, you can also track and optimize the way you manage your procurement activities, resulting in simplified procurement that is easier for your team and your suppliers to engage with. Clarity in the procurement process is important for avoiding mistakes and building stronger strategic partnerships.

Safeguard your business – Supply chain risk must be mitigated where possible. Supply chain disruption and delays can have significant cost implications that no business wants to deal with. Strategic sourcing can be used to continuously evaluate suppliers in regard to risk management criteria, such as maintaining important accreditations and providing ongoing staff training, allowing you to respond to new or developing risk factors.

Align suppliers with business goals – As your business grows, your goals will change. For example, many businesses are now adopting new ethical work policies such as sustainability or workforce inclusion/diversity. The ‘set and forget’ mindset can mean you end up working with suppliers that go against your changing values or business goals. Strategic sourcing, on the other hand, ensures you build and maintain relationships with those suppliers that are aligned with your business.

How Market Dojo helps you build your own strategic sourcing process

Market Dojo offers powerful on-demand services that promise flexible opportunities for businesses of all sizes to optimize and strengthen their supply chains through strategic sourcing.

Our full suite of tools includes our flagship product, Market Dojo, our unique eSourcing platform designed to help you run eAuctions and put out tenders for supplier contracts; Category Dojo, Market Dojo’s industry-leading sourcing analysis software that is purpose-built to support strategic sourcing through advanced data processing and define market strategy; and, SRM Dojo, our supplier management optimization tool that allows you to build stronger supplier relationships and cultivate strategic sourcing developments through seamless supplier communication, activity monitoring and data tracking.

With Market Dojo, you can create a fully formed and easy-to-manage approach to optimizing sourcing and procurement. From using our eAuction tools to compare opportunities, negotiate and align suppliers to your business goals and budgets to using SRM Dojo to develop robust relationships and maintain supplier information, Market Dojo is your go-to service provider for better sourcing solutions.

Our on-demand services really are on demand! Discover month-to-month eSourcing subscription packages that don’t tie you to contracts, alongside free plans and opportunities to try out our full suite of eSourcing software services. Start getting the most out of your procurement today and begin your strategic sourcing.