strategic sourcing

Strategic sourcing is an institutional procurement process that continuously improves and re-evaluates the purchasing activities of a company. It is one component of supply chain management.

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

1. Assessment of a company's current spend (what is bought where?)
2. Assessment of the supply market (who offers what)?
3. Development of a sourcing strategy (where to buy what, while minimizing risk and costs)
4. Identification of suitable suppliers
5. Negotiation with suppliers (products, prices)
6. Implementation of new supply structure
7. Track results and restart assessment (continuous cycle)

Strategic sourcing was initiated by General Motors in the 1980s.

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 a company who then provide them back as a service.

Strategic Sourcing Tools

Sourcing Tools have been developed since the beginning of the year 2000 to support the Strategic Sourcing process. They have developed originally from a Reverse Auction functionality to the full spectrum of the Sourcing process, enabling an entire integration of electronic process. The tools often are presented as the following functionalities:

1. A Supplier Database with enrichment capabilities
2. A Classification System such as UNSPSC or eClass to "source" the supplier database
3. A collaborative environment for the purchasers to build the specifications
4. A publishing tool for RFi (Request for Information) or RFq (Request for Quote)
5. A An integrated messaging system
6. A Reverse Auction Tool
7. An Electronic Negotiation module
8. An awarding functionality
9. A Contract Management Module.
10. [Spend Intelligence] analysis

The tool can be stand alone (accessible via a web page for example) or fully integrated to the procurement process.

Sourcing Tools Providers

Many eMarketplaces were born from different industries as a Global Sourcing Strategy. Many industrial sectors had their own eMarketplace such as, for example,

• Eutilia - For the Energy Market in Europe
• MoreDirect.com-For the IT Industry
• Chemikalia - For the Chemical Industry
• The Rubber Network - The Tyre industry
• Aquadia - European Water Utilities

Of these, few remains. The existing marketplace have developed certain different approaches, either by sector or by geographical location. Some are mainly software providers while some others are more service oriented.

Some major tool providers are:

• Emptoris
• Quadrem
• Ariba
• Moredirect.com
• Procuri
• Synerdeal

References

1. ^ Nishiguchi, Toshihiro. Strategic Industrial Sourcing (New York: Oxford University, 1994) ISBN 0-19-507109-3

See also

• Reverse auction
• Request for proposal
• Procurement
• Rate contract
• Global sourcing
• Tenders

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