What is it?
Strategic sourcing is an approach to supply chain management that validates the way information is gathered and used so that an organisation can leverage its consolidated purchasing power to find the best possible values in the marketplace.
Strategic sourcing is important to any business involved in purchasing goods, services or capital. During the acquisition process, there are several factors to be considered including; what is bought where, what products do different suppliers offer and how much does it cost to provide that good or service?
Procurement is the acquiring of goods, services or works from an outside external source. It is favourable that the goods, services or works are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location. In supply chain management, it is used in parallel to strategic sourcing to introduce the condition of scarcity to decision making.
- Some companies do not know the differences between strategic sourcing and procurement in supply chain management
- Many still lack the Total Cost of Ownership perspective
- Too many suppliers for a single commodity
Why use it?
- Cost-effectiveness from having fewer suppliers that really serve clients’ needs