By examining the current state of strategic sourcing through the lens of an ongoing effort at a large U.S.-based manufacturing company, this paper presents practical guidance and examines how strategic sourcing capabilities are evolving among leading practitioners. This guidance begins with a revealing question: How do we want to move our strategic sourcing activities forward? The question is important at a time when many efforts have reached a plateau in their evolution.
Strategic sourcing is not new. Most procurement and supply chain decision-makers have long understood and applied the concept to their domains. But how effective have these efforts been? The case example and field reporting contained herein indicate that certain strategic sourcing efforts have been extremely effective – in one case, achieving a savings of 14 percent to 20 percent in one global category (totaling in excess of US $100 million).
If more companies are to achieve this sort of success and take their sourcing efforts to the next level, they should start by looking at the practices presented herein and then focusing on a continuous “lifecycle” approach to strategic sourcing.
The insights in this paper include a discussion of the obstacles – internal reluctance, supplier resistance and research challenges – that most strategic sourcing efforts encounter. The paper also examines the key drivers of success, including executive support, fact-based research, concrete action plans and a commitment to continuous improvement, so that strategic sourcing operates as “lifecycle sourcing.”
That commitment can deliver significant benefits in addition to cost-savings; namely, by fortifying procurement’s credibility as a strategic business partner with a seat at the decision-making table.