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The Changing Face of Strategic Sourcing

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Gone are the days when the old school of strategic sourcing used to yield results. With the economic crisis and the change in the global supply chain scenario, the strategic sourcing scene has changed from what it was a decade ago.


Organizations have become leaner not only at the buyer's end but at the supplier's end as well. Hence, not necessarily the suppliers might have an army of people to hunt down every proposal that comes their way. Buyers also need to have sales skills nowadays so they can attract the supplier who is most suited for their need, at the optimal price. The old school of thought might state that the buyer needs to have procurement skills not sales, hence s/he works in procurement, but the times have changed now.

More and more investments are being made towards automation, standardization and organizations are more open now towards technologies like SaaS as compared to earlier. The level of IT and systems integration has increased, so that the systems talk to each other & the information present in different systems doesn't conflict and there is seamless flow of data from one to another. This is not only essential for carrying out activities such as spend analysis, compliance etc. but also for the integration of inter-related processes of sourcing, procurement, payment and supplier management.

Sourcing projects are now carried out with cross functional teams with the key stakeholders buy-in instead of people working in silos earlier. Decision making effectiveness has increased as there are clear roles & responsibilities laid out and how the decision making needs to take place. This leads to increased efficiency in the process & increase in the sourcing project savings. Besides internal teams, external integration has also started taking place on a more frequent basis. Suppliers have started getting more involved during the new product development stage, so that maximum issues can be tackled during the design stage of product, rather than the latter stages of the product lifecycle which would involve more time, effort & money. However, due to this to security of information and intellectual property have also gained prominence.

Sourcing personnel have started looking more seriously towards the emerging markets which were earlier considered just as a 'good to have' supplier list. Economic pressures have forced them to look that way with a more strategic approach. As a result, supply market experts have become an integral part of the category & sourcing planning exercise.

Attention towards green and sustainable sourcing has also increased during the recent years. Buyer organizations have started administering environmental supplier questionnaires, auditing, ranking and rewarding suppliers for environmental performance, placing emphasis on environment related certification such as ISO 14000. Evaluation of environmental practices of second tier suppliers has also gained importance. Buyers are working in collaboration with their suppliers to make joint decisions about how to reduce the impact of their products on the environment.

With the risk to supply disruption increasing day by day posed by numerous causes, mitigation of supply risk has become an important agenda for the sourcing professional. RFPs have started to put more focus on the risk parameter. There has been an increased emphasis on supplier audits & supplier's compliance to the contracted terms. Buyers have started looking at incidents like drops in quality, shipment delays, request for early credit etc. in a more serious manner as early warning signs and raise a red flag. The supplier management program (performance, relationship & risk) are gaining increasing importance as compared to the past decade.

'Change is the only thing which is constant' is applicable for the sourcing world as well, which remains dynamic as ever. So, what all changes have you come across in your sourcing world?

Comments

Deepa - Another blogpost and a good one again. Yes sourcing world is ever changing and we as sourcing professionals need to updated always. Good blog!! Keep going...

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