Strategic sourcing as a way of your procurement transformation in main

competitive advantage of your company

07 October 2015

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About author

Vladislav Mandryka is procurement professional with outstanding skills in strategic sourcing, supplier relationship management, spend management, contract negotiation, project management and process improvement in challenging dynamic environment.

10-years of procurement career in world transnational corporations of FMCG sector (SABMiller, Anadolu Efes).

Has a master degree in business administration in Open University business school.

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What does strategic sourcing mean?

Strategic sourcing is a process of systematic collection, subsequent analysis and evaluation of the internal and external data in order to develop the most appropriate strategy for selection of the suppliers.  

Main aim of strategic sourcing is optimization the spend analysis and achievement a partnership with a limited base of suppliers in order to decrease annual costs, improve quality, increase ROI, increase the quantity of JIT supplies etc.

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Structure of strategic sourcing

Identify and understand current usage

Conduct industry analysis

Tasks Collect detailed supplier information

Generate potential supplier master list

Develop qualification criteria

Screen potential supplier list against criteria

Assess current sourcing practices

Strategically segment the category

Analyze alternative sourcing strategies

Select appropriate sourcing approaches and techniques

Select RFP or supplier development path

Select method of negotiation

Develop RFP execution strategy

Develop RFP

Issue RFP Analyze RFP responses Develop negotiations

strategy Conduct negotiations Recommend suppliers

Identify integration issues

Consider organizational implications and required changes

Create new processes and procedures

Create transition/ implementation plan

Monitor results

Benchmark supplier performance

Develop processes to monitor market/industry conditions

Understand internal spend and external data

Aim Identify all viable suppliers

Create “go to market” approach

Decide most appropriate execution strategy

Conduct aggressive negotiations and select suppliers

Operationalize supplier agreements

Monitor market and supplier performance

Category deep dive review Internal spend

analysis Industry

overview and market dynamics

Outputs List of suppliers segmented by capabilities

Supplier qualification criteria

Supplier “short list” for RFP

Category sourcing strategy summary Internal

analysis Constraints Category

positioningmatrix

Savings estimate calculation

Savings realization schedule

RFP analysis Negotiation strategy Strategy/team roles Post negotiation

analysis Supplier

recommendations Supplier terms and

conditions

Implementation plan Savings

measurement and tracking process

Conversion timeline

Supplier validation

Internal and external communications strategy

Ongoing category review process

Supplier performance report card

Spend ManagementTools Supplier Search Supply Market Solutions (industry analysis, sourcing approaches)

Supply Market Solutions

Sourcing Team Tools

RFP Negotiations

Deal Management Sourcing Team

Tools

Spend Management Sourcing Team Tools Supply Market

Solutions

Identification of the commodity sourcing group

Sourcing strategy development

Designing supplier portfolio

Sourcing strategy implementation

Negotiations Operational integration

Continuous benchmarkingSteps

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Team development

Collaborating with key internal customers, stakeholders and decision-makers.

Assessing processes, understanding the competitive landscape and proposing solutions designed to maximize spending effectiveness.

Maintaining day-to-day supplier relations.

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Benefits of strategic sourcing

• estimated 5-10% of realized savings• focusing on opportunities to generate realized

savings in in targeted spend areas;• inspiration of collaborative operation across business

units;• development new thinking about performance

metric;• production innovation from the supplier base;• improvement of internal teamwork and

communications

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Most companies from Fortune-500 use strategic sourcing