The first 8-step model for strategic sourcing came about in 1994, thanks to Toshihiro Nishiguchi. Typically, the five strategic sourcing process includes the following steps or phases. Strategic sourcing is an ongoing process requiring multiple sources of information. Strategic sourcing helps in analyzing overall spend and suppliers. It is carried out by analyzing spending patterns, defining requirements and aligning the company’s needs with market capabilities. Step One – Fully understand the spend category. 01/2017 - PRESENT. Purchased materials and services often make up 60 to 80 percent of a product’s cost. Importance of Strategic Sourcing Skills. The first step in adopting a strategic sourcing mindset is to plan for the future. Strategic sourcing is important for a variety of reasons, but the most notable is this: relationships. and the vendors in your supply chain (e.g., compliance and performance data, redundancies for both direct and indirect spend, etc. The first step in the sourcing process is to understand the spend category. A strategy is a broad plan for how the organization is going to compete with others for the same talent, what its goals should be and what policies should be followed to achieve these goals. IMPLEMENTING STRATEGIC SOURCING. Strategic sourcing does often require more work being done--especially when you use the method for the first time in general or for the first time with a particular product, service, supplier, etc.--but there's the potential for a bigger payout when it is done properly. In order to develop a portfolio of opportunities, you must evaluate the data available to determine what improvements can be made. Strategic partnership: Entering into an agreement with a selected supplier. Step 5: Implement the sourcing strategy Plan your sourcing strategy. It ensures that the company acquires goods and services on a cost-effective basis while improving value creation. It provides a strict and well-educated process for categories which steers savings and supplier service. These include the following: Analyze product categories used by the business, spending patterns, and the processes and departments involved. Strategic sourcing best practices recommend the use of category management and other software tools to handle the complex market, data, and spend analysis tasks that strategic sourcing demands. Like all business pro-cesses, there is no single, right or wrong solution. Initial Spend Analysis : As a first step, I often do a 10,000 ft. spend analysis by reviewing and classifying all expenses by spend category (i.e. Before describing the process for creating a sourcing strategy, let's first set the stage by reviewing a few key concepts. She is a member of the Singapore Institute of Purchasing and Materials Management (SIPMM). 1. An effective strategic sourcing program typically generates 10% to 20% savings against a company’s external spend, making it an incredibly powerful value creation program. Sourcing is the process of taking the benefit of purchasing opportunities by continually assessing the relevant needs, market trends, and available resources in the market.. Sourcing is an essential factor for businesses and companies to look into, to grow and prosper over the years. ‘Managing Indirect Spend: Enhancing Profitability Through Strategic Sourcing’ which, incidentally, became the fundamental basis for global consulting firm AT Kearney to delve into said concepts and is the foundations for what we know today as the ‘Strategic Supply Process’. Strategic Sourcing Goal #2: Quality. A modern 7-step model for strategic sourcing in your organization. The five major regions that are analyzed in the first stage are as follows − The process is fairly straightforward, but if you have never worked with a partner in China or had experience producing a component overseas, it can seem overwhelming. Create an environment that encourages growth, visibility and continual learning for peers and stakeholders. The following is a logical step by step process to maximize the potential result of a strategic sourcing effort. A modern 7-step model for strategic sourcing in your organization. SAP Ariba is the strategic sourcing suite you need to speed up your sourcing cycles, discover qualified suppliers, and achieve sustainable savings. Not at all. Strategic sourcing is a supply management tool that delivers significant cost reductions and other benefits, the Institute for Supply Management says. Here's a roadmap to help you get started. And yet, while 83% of companies source proactively, only 46% of them know how many candidates they have in the pipeline. raw materials, equipment, packaging, printing, lease programs, legal services etc. Affecting change in an organization is never easy. Download n… Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. It’s a continuous process that takes into account factors far beyond the cost of a product or service. Virtually all leading organizations have a variation of the strategic sourcing process for the execution of the supply management process that includes all these activities, although they may be divided into different steps. A seven-step approach popularized by consulting firm A.T. Kearney (2004)8 is given below. In traditional LSS, the purpose of the Define phase is to select an appropriate project and then clearly define the The Strategic Sourcing Model The Strategic Sourcing Model is based on a series of activities that must take place in order to be successful. Strategic sourcing can provide myriad benefits. This is done at CEO, CFO, or CPO level and involves selecting areas of spend that could produce cost reductions or process improvements. Sourcing is the process of taking the benefit of purchasing opportunities by continually assessing the relevant needs, market trends, and available resources in the market.. Sourcing is an essential factor for businesses and companies to look into, to grow and prosper over the years. Develop Category Profile 2. Creates Value for Customers: Anticipates and responds to market trends and opportunities. A leader and visionary, the strategic sourcing champion is an early recognizer of the potential of the process. There are five major questions purchasing managers must answer when defining their spend category. A strategic sourcing "champion." Given the importance of strategy, the consulting firm AT Kearney developed and popularized seven steps in the Sourcing process: 1. Step 3: Strategy development. It encompass the whole process for evaluating, selecting and aligning with supplier (s) to achieve operational improvements and support overall strategic objectives. These steps include data capture, software tools, and analysis. 4) Make the Most of Technological Tools. Executed 7 step strategic sourcing processes to maximize effectiveness and deliver optimum results. In order to identify what’s working, what isn’t, and where you need to trim the fat, the first step in achieving strategic sourcing involves benchmarking your current procurement processes (efficiency, cost-effectiveness, roadblocks and pain points, etc.) Three essential steps to creating a sourcing and procurement plan. It’s vital to consider the following in as much detail as possible: Create the Sourcing Event Step 2: Configure Line Items Navigation: Main Menu >> Sourcing >> Create Events >> Event Details 6)Select AllClick and then OK or select the checkboxes individually Now all line items selected should appear on the Line Items screen 7) Return to Event OverviewClick to continue creating sourcing event Definition: A systematic and fact‐based approach for optimizing an organization's supply base and improving the overall value proposition. The first step starts with embarking on a disciplined and organized evaluation of your sourcing needs. The most common process for soliciting bids is typically a Request for Proposal and will include product/service specifications, delivery and service requirements, pricing breakdowns, along … Strategic Sourcing helps to reduce the total cost of purchasing while maintaining quality and service. A strategic sourcing "champion." About the Author: Lau Chee Leng has substantive years of procurement experience, specifically in the construction sector. Step 1 – X Ray Phase | Fully understand the spend category This step usually is managed by the procurement team and in this phase the team needs to … In a recent contributed article for Contract Management magazine, we discuss the role excellent teamwork plays in helping organizations realize the potential of strategic sourcing, and we offer specific steps for building the type of teamwork that can help you achieve cost reduction through strategic sourcing and contract management. It involves internal collaboration with stakeholders and suppliers, as well as critical analysis of spend, and supplier risk management. Building superior capabilities for strategic sourcing | McKinsey. To turn the purchasing function into a high-functioning strategic asset, an organization Strategic sourcing’s primary goal is to guarantee the best long-term value for money when purchasing. ), as well … Identify recruitment sourcing goals. This is a strategic sourcing next steps ppt PowerPoint presentation infographics example. Strategic sourcing and supplier management and integration decisions must be aligned with corporate mission and vision, have direct operating company involvement and must be based on a well-defined business case. 12 Steps to Strategic Sourcing. Step 1 – Stakeholder commitment Strategic sourcing begins with a full analysis of your core business needs and historical spending, which must factor in input from your organization’s key stakeholders. That’s the start of sourcing candidates efficiently. Identifying scope, objectives of the program and internal requirements are just the beginning. All of these factors can reduce the cost of procurement, so a strategic sourcing software is an imperative tool to improving procurement. What Are Strategic Sourcing Steps?. ). Strategic sourcing and procurement are two approaches to purchasing the components, raw materials, supplies and services a company needs to run its business. Traditional procurement focuses on finding the lowest-cost suppliers. The evolution of management theory generated many definitions, like this from the person who probably holds the Guinness record for appearing in most university subjects, Michael Porter: A widely used definition by Oxford Dictionary states: The key things to u… 5 Insights About Sourcing and Developing Strategic Partnerships. Steps to Improve the Strategic Sourcing Process . Strategic Sourcing 101: Understanding the RFP Process When it comes to making big-ticket purchases, buyers should try to make their evaluation process as rigorous and objective as possible. By taking these steps to collect data and create a performance measure on the inclusion of small businesses in strategic sourcing initiatives, Interior has helped ensure that OMB reporting requirements are met and that it can track the impact of its strategic sourcing efforts on … In this course, we describe the steps entailed in the strategic sourcing process. Global Sourcing is not as difficult as you may think, especially when you have the right partner. Negotiate & Select Suppliers 6. It is aimed at determining which goods and services will be strategically sourced through the application of the follow-on steps. Step 1: Strategic Sourcing Team Meeting (Annual) The first step in the process is the kickoff meeting for the upcoming calendar or fiscal spending year. Strategic sourcing best practices include: digitizing documents, participating in a digital business network, and automating workflows. Analyse the market, identifying potential new suppliers, both local and global. The Strategic Plan for Strategic Sourcing of Services reinforces the key principals of strategic sourcing, including collaboration, transparency, and strategic decision-making. 5. This is a strategic sourcing next steps ppt PowerPoint presentation infographics example. What it is What it is NOT Focused on the Total Cost of Ownership (TCO) incorporating To help you keep track of all the necessary steps, the following simple vendor relationship management checklist is offered as a … Keep in mind: An important input to the supplier selection process are the guidelines for the types of suppliers you want. Procurement is a strategic process, meaning it involves a careful analysis of internal and external data to inform decision-making. Strategic sourcing addresses this issue by providing a strategic approach towards optimizing and continuously improving sourcing activities using a proven 7-step methodology. Strategic Sourcing Steps – 7 stages & Beyond – PURCHASING LEAD When implemented properly, this process guides the sourcing manager to realize the future objectives of both the parent firm and their partner and adapt the partnership to them. Having the sourcing steps and process mapped out can definitely help in risk management. Implement Agreements 7. Step 1: Identify spend areas. Identifying spend areas is a key step in improving the strategic sourcing process. Analysis of the product categories used by the business, spending patterns and processes and departments involved The primary objective of any organization’s sourcing and procurement department is to maintain a continuous supply of goods and services, supporting the operational needs of the organization. The third step is a kind of reality check in which you determine whether a capability that is a strong candidate for strategic sourcing can be carried out at a distance without any loss of quality. Global organization design, including assessment of the potential for offshoring data-intensive strategic sourcing sub-processes such as cost modeling and market intelligence gathering. their goals. It can be applied to each of an organization’s spend categories. At the heart of strategic sourcing is a seven-step process. The process of sourcing is a crucial step and needs to be incorporated for offering high valued services. This article merely outlines one angle used in actual practice. Strategic Sourcing is a critical element of the Supply Chain. In this course, we describe the steps entailed in the strategic sourcing process. The value of strategic sourcing in healthcare. Strategic sourcing is a systematic, long term and holistic approach to acquiring current and future needs of an organization. Beginning with the end system in mind is critical to developing a working program. Identifying spend areas is the most important in the strategic sourcing process. To be successful with strategic sourcing, it is crucial to develop a strong team of individuals with specific skillsets focused on market research, finance, accounting, operations, procurement and communications. This approach takes into consideration the entire cost of ownership. Certified Strategic Sourcing Professional (CSSP) Provides comprehensive program for sourcing professionals on strategic sourcing principles and application to deliver enormous value to an organization that are derived from managing cost & risks, quality, sustainability, supply continuity, and category management. Points of Interest At a glance, here are the main points covered in this article. Following this, develop a strategic project plan informed by your data and market analysis. Running a successful strategic sourcing process for high value services like outsourced customer service is a complex undertaking. 7 Steps of Strategic Sourcing Process Step 1: Identify spend areas. The procurement department is often viewed and managed as an administrative function, with sourcing activities executed at arms length. Once the risks are identified, you can specify measures to avoid or mitigate the risk. Strategic Sourcing- The Six Step Process. Best Practice Analysis Strategy Strategic Relationship Strategy Demand Management Strategy Process Improvement Strategy 2. Strategic Sourcing is a marketing stack aimed at filling your pipeline with high quality leads. A comprehensive marketing stack awaits for you You Can Become Laser-Focused With An Semi-Automated Organic Client Generating Machine. In order to meet quality goals, the strategic sourcing teams must ensure that suppliers are closely integrated with the OEM. Strategic Sourcing Management Strategic supply management aims to improve quality and service while reducing the total cost of purchased materials, products, and services. Strategic Sourcing found in: 7 Steps Strategic Sourcing Supply And Process Management Ppt PowerPoint Presentation Pictures Example File, Strategic Sourcing Next Steps Ppt PowerPoint Presentation Infographics Example, Strategic.. When implemented properly, this process guides the sourcing manager to realize the future objectives of both the parent firm and their partner and adapt the partnership to them. Recognize and value individual differences and contributions; seek to include diverse and global perspectives. Global Sourcing is not as difficult as you may think, especially when you have the right partner. The cost of a bad decision can be devastating. These steps include: The strategic sourcing process has many variations, but is most commonly broken into seven steps popularized by consulting firm A.T. Kearney. Understand everything about the spend category as the first step in the strategic sourcing process. Companies that don’t invest in the purchasing team’s capabilities are throwing away value. The second step is track and analyze internal spending. Total cost analysis (how much does it cost to provide those goods or services? Strategic sourcing is a multi-step process with several considerations. A. T. Kearney’s Seven Steps for Strategic Sourcing By using the following process, procurement professionals can successfully source or renegotiate contracts. Strategic sourcing is the backbone of any world-class supply chain. Strategic Sourcing 101: Understanding the RFP Process When it comes to making big-ticket purchases, buyers should try to make their evaluation process as rigorous and objective as possible. Included is a detailed, seven-step illustration of the process that shows all the necessary procedures, from data collection to implementation. Strategic sourcing process steps. Determining the right strategy for you will depend on the competitiveness of the supplier marketplace and the sourcing/outsourcing organization’s risk tolerance, overall business strategy and motivation for outsourcing. 7 Steps of Strategic Sourcing Process. A more strategic approach to sourcing helps organisations avoid common pitfalls and delivers a fit-for-purpose contract that is a success for the client and supplier alike. model or a six step process for strategic sourcing. 2.1) Understanding sourcing. DPS Strategic Sourcing is a member of the National Institute for Governmental Purchasing (NIGP), which is dedicated to the establishment and maintenance of ethical standards and professionalism in public purchasing. A question so simple, but one which has so many answers to. Sourcing strategy development, including alignment with business objectives of spend owners. 2. Identifying spend areas is a key step in improving the strategic sourcing process. Strategic sourcing software process steps: There are different steps of the strategic sourcing software process, which have many variations. 7 Steps of Strategic Sourcing Process Step 1: Identify spend areas. Houston, TX. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Procurement is a strategic process, meaning it involves a careful analysis of internal and external data to inform decision-making. These cost reduction programmes are strategic methodologies that bring success and sustainability. executed at arms length. related to Strategic Sourcing steps. A strategic sourcing program can be segmented in many ways into a step-by-step approach. So check out these 5 steps of global sourcing. Strategic sourcing achieves efficiency by formalizing the way spend information is gathered, analyzed, and factored into the procurement process. Data management and analysis. The key steps in a continuous strategic sourcing process were defined by Japanese writer Toshihiro Nishiguchi in 1994 as: Assessment of a company's current spending (what is bought, where, at what prices?). Supply executives who want to implement strategic sourcing should demand support from their organization's leader or entire leadership team. A selection of high-quality charts and diagrams to communicate tasks and objectives, as well as the individual process steps of strategic sourcing. What is Strategic Sourcing? Identifying spend areas is a key step in improving the strategic sourcing process. Here are the basic steps of a sourcing strategy: Create a sourcing strategy format. Strategic Sourcing Steps: A Seven-Step Approach. Managed cross functional teams to support strategy plan initiatives, realizing $2.4M savings from 2013-2014. And cost-efficient, systematic sourcing is a process that requires thoughtful preparation. Continuous Improvement. For successful fleet procurement, a strategic sourcing plan should be based on a 7 step strategic sourcing process.This process allows for the procurement department to evaluate the suppliers used for acquiring goods and services as well the cost incurred, and the quantities required. The process extends from building and running an RFP competition, through delicate negotiations, and right down to crafting the service level agreement. The foundation of any successful Strategic Sourcing project is having access to accurate and timely purchasing data. Step One: Understand the Spend Category. Therefore, a key first step … About the Course Strategic sourcing enhances efficiency and value, ultimately impacting the profitability of any organization. Here’s a brief outline of the process flow: Step 1: Category profiling. Strategic Sourcing service is a solution to drive savings of all spend categories through better supplier selection and reduced supply risk. Generate Supplier Portfolio 4. The cost of a bad decision can be devastating. It defines the strategy for how and why companies procure and includes the constant evaluation of purchasing activities within an enterprise. These guidelines are impacted by your Sourcing Strategy; which we … Strategic Sourcing – Assess for Improvement Opportunities. There are many articles and guides on this topic that offer a good overview on various steps involved in successful purchasing activity. Delivers on promises made. All organizations, big or small, have realized the importance of Strategic Sourcing in this dynamic and volatile market to stay competitive. Strategic sourcing software takes managers through the following steps of the strategic sourcing process: Spend analysis The first stage of strategic sourcing is for the system to initiate a spend analysis to identify areas in which spend could be decreased through new sourcing projects. A vendor is exactly that — a vendor. When I first introduce this concept to an organization or team, someone inevitably jumps to the conclusion that "strategic sourcing" is a euphemism for "outsourcing". This PowerPoint template summarizes the tasks and objectives of strategic sourcing. Start studying Strategic Sourcing. Develop Sourcing Strategy 3. The initial step of profiling a commodity although, a necessary part of the overall endeavour, serves as a precursor to the follow-on steps. Get started. The course focuses on the 12 objectives supporting the 7 essential steps which consist on database, strategies, financial, sources, partnerships, inputs and metrics. The wrong decisions during the sourcing process can lay the foundations for a contract burdened by service delivery issues and cost escalation. Identify key sourcing requirements. Strategic Sourcing Manager. There are many benefits of a strategic approach, but there are also many steps on the journey to getting there. We adopted a seven-step strategic sourcing approach to help the client accomplish . Definition of strategic sourcing Strategic sourcing is an approach to supply chain management that formalizes the way information is gathered and used so that an organization can leverage its consolidated purchasing power to find the best possible values in the marketplace. Such as, Used by the business to analyze product categories, departments, and process that are involved and spending the patterns. Make sure you have the right relationships with the suppliers you work with so you are aware and can properly prepare for any upcoming large projects — such as new developments or growth plans. D efin The typical LSS tollgate for the Define phase is a charter with objective, scope, team, goals, tollgates, and schedule. Step 2: Supply market analysis. However, being a term that encompasses a large number of sub-concepts, understanding strategic sourcing might get complex. With it, procurement can find ways to save money while also adding value. Strategic sourcing is a procurement process that continuously improves and re-evaluates the purchasing activities of a business in order to reduce costs, improved stability, and provide a host of other benefits. How does strategic sourcing work? Strategic sourcing is the process a business uses to allow procurement to take the lead in satisfying business needs. Source: whatis.com The following four steps provide a high level overview of the strategic sourcing process in which strategic/tactical and operational components are deployed. Strategic sourcing is a structured process that optimizes a company’s supply base, increases efficiency and reduces cost. This is a three stage process. The process is fairly straightforward, but if you have never worked with a partner in China or had experience producing a component overseas, it can seem overwhelming. What is Strategic Sourcing? Step 1 - Profile the Category. Once you are organized for success (see previous blog), the next step is to dig in and find as many opportunities for improvement as you can. Fosters Change and Innovation: Seeks solutions that strengthen quality, value, service and effectiveness. Respectfully challenges the way “things are done” and supports others in doing so. This means defining the category and commodities in it. Director, Strategic Sourcing. Strategic Sourcing reviews commodities is a larger scale, short & long term, is not passive, is very active, and the segmentation analisys, helps with value added options, risk mitigation along with Supplier Performance Management are a core for Strategic sourcing… Step 4: Select the sourcing process – Next, a business needs to develop a sourcing strategy. The potential source goes through a series of steps starting with component testing, followed by system testing. A leader and visionary, the strategic sourcing champion is an early recognizer of the potential of the process. The process of sourcing is a crucial step and needs to be incorporated for offering high valued services. According to the Aberdeen report, 68% of their survey respondents say that strategic sourcing plays a prominent to crucial role in their organization 3% of respondents indicated that aligning sourcing activities and objectives with those of the greater organization is a top strategic goal. But when your organization as a whole steers towards strategic sourcing, you are taking crucial steps in identifying a partner. Strategic sourcing is an ongoing process. Becoming proficient in this field and keeping your knowledge up-to-date, will help you understand, plan and implement a sound strategic sourcing strategy, tighten the effectiveness and efficiency of your supply chain infrastructure and reduce overall costs almost immediately. With that in mind, and using Figure 1 as a guide, let us examine the three key steps in the transformation to a high-performance, strategic sourcing organization. Specifically, procurement is a long-term plan for strategically sourcing and acquiring materials or services from an outside party. This integration begins with an intense qualification process. This is done at CEO, CFO, or CPO level and involves selecting areas of spend that could produce cost reductions or process improvements. Without following through all the necessary steps to discover where the spending trends are and where opportunities lie, we are simply purchasing in traditional ways.