WHAT is Strategic Sourcing and WHY CXO's Should Care
I’m often asked; “what is Strategic Sourcing and how is it different from Procurement and Purchasing? Where does it fit into the supply chain? What’s so strategic about it? It sounds so complicated and unnecessary. Why should I even care?”
What is Supply Chain?
Okay, I’m going to ask for your indulgence for a minute please before we get to the Why. I know you didn’t ask but to better understand Strategic Sourcing, lets first start with what is Supply Chain? Strategic Sourcing, Procurement and Purchasing are merely steps in the Supply Chain. Supply Chain, put simply by my definition, is the process of moving goods and services from the point of origin to the end consumer. The steps in between refer to the links in the chain from product design, source, manufacture to deliver. This is a simplistic description and much more complex but for the purpose of this article, we will leave it there.
What is Strategic Sourcing?
From the above description then we can surmise Strategic Sourcing is part of the Supply Chain however, not yet what it is? Strategic Sourcing is identifying and managing proactively what a company or consumer needs, anticipating or planning for the needs or requirements and optimizing the way to source in a strategic way through category management. The goal is to source the best solution, ensure and mitigate supply risk while saving money. Strategic Sourcing may include; forecasting requirements, analyzing historical purchases, researching the market to determine sources or suppliers to satisfy those requirements and developing a sourcing strategy on how you will acquire the goods or services. Its is the PROACTIVE approach that differentiates it from Procurement.
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