8/2/2019 Consulting - Strategic Sourcing

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Strategic sourcing is an institutional procurement process that continuously improves and

re-evaluates the purchasing activities of a company. In a production environment, it is often

considered one component ofsupply chain management. Strategic sourcing techniques are

also applied to non traditional area such as services or capital.

The steps in a strategic sourcing process are:[1]

1. Assessments of a companys current spend (what is bought where?)2. Assessment of the supply market (who offers what?)3. Total cost analyses (how much does it cost to provide those goods or services?)4. Identification of suitable suppliers5. Development of a sourcing strategy (where to buy what considering demand and

supply situation, while minimizing risk and costs)

6. Negotiation with suppliers (products, service levels, prices, geographical coverage,etc.)

7. Implementation of new supply structure8. Track results and restart assessment (continuous cycle)9. Negotiate with the vendor about the payments terms of the specific organisation.

The term "Strategic sourcing" was popularized through work with a variety ofBlue Chip

companies by a number of consulting firms such as A.T. Kearney, Booz Allen Hamilton,

KPMG, PricewaterhouseCoopers, and PRTM in the late 80s and early 90s. This methodology

has become the norm for procurement departments in larger, sophisticated companies.

Outsourcing is a method that can be employed as part of the overall sourcing strategy for

services. This involves the transfer of staff and assets to an external or third-party companywhich then provides them back as a service.

Strategic Sourcing is a comprehensive process aimed at obtaining maximum advantage on cost,

technology, process and quality, by leveraging the companys buying power

Strategic Sourcing is a comprehensive process designed to pursue all value levers by leveraging a

companys buying power with select suppliers, conducting best price evaluations, sourcing globally

and conducting company/supplier joint process improvements

The strategy is to shift the companys focus from the current transaction oriented independentbuying of goods and services to a product oriented strategic approach.

The Strategic Sourcing approach is designed to:

drive reduction in total cost of acquisition of goods and services

drive a thorough understanding of both the supply market and internal company requirements

deliver significant earnings to bottom line

deliver improved value to all

http://en.wikipedia.org/wiki/Procurementhttp://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Strategic_sourcing#cite_note-0http://en.wikipedia.org/wiki/Strategic_sourcing#cite_note-0http://en.wikipedia.org/wiki/Strategic_sourcing#cite_note-0http://en.wikipedia.org/wiki/Blue-chip_companieshttp://en.wikipedia.org/wiki/Blue-chip_companieshttp://en.wikipedia.org/wiki/A.T._Kearneyhttp://en.wikipedia.org/wiki/Booz_Allen_Hamiltonhttp://en.wikipedia.org/wiki/KPMGhttp://en.wikipedia.org/wiki/PricewaterhouseCoopershttp://en.wikipedia.org/wiki/PRTMhttp://en.wikipedia.org/wiki/Outsourcinghttp://en.wikipedia.org/wiki/Outsourcinghttp://en.wikipedia.org/wiki/PRTMhttp://en.wikipedia.org/wiki/PricewaterhouseCoopershttp://en.wikipedia.org/wiki/KPMGhttp://en.wikipedia.org/wiki/Booz_Allen_Hamiltonhttp://en.wikipedia.org/wiki/A.T._Kearneyhttp://en.wikipedia.org/wiki/Blue-chip_companieshttp://en.wikipedia.org/wiki/Blue-chip_companieshttp://en.wikipedia.org/wiki/Strategic_sourcing#cite_note-0http://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Procurement