5 Benefits Of Strategic Sourcing Solutions

In the fast-paced world of supply chain management, procurement and sourcing are two of the most critical cogs in a well-oiled machine. Part of succeeding in a fast-paced, ever-changing environment—one that can also be negatively impacted by unexpected events—is having a good plan. That’s where strategic sourcing initiatives can help.

Strategic sourcing sounds sort of like a marketing term company’s use to make something sound interesting. But it’s much more than that. The concept of strategic sourcing examines procurement procedures, suppliers, sourcing controls,

It can be direct or indirect and take place in real-time, and ultimately leads to streamlining and lower costs down the line.

Implementing technology-based applications, resources, and solutions into your sourcing and procurement procedures helps you create a high-quality, tactical approach to handling your entire supply chain. Here are five benefits to using tech-based strategic sourcing solutions in your supply chain.

Choosing Suppliers

Sourcing is one of the most critical jobs supply chain managers have in their role at any organization. Part of the role involves constantly researching new suppliers and re-assessing your current suppliers. A good supplier is one that can fulfill contract negotiations, presents a limited risk, and has a good track record. Want to know what to look for in a supplier? Here’s a brief list:

• Reliability
• Quality
• Consistency
• Value (do they strike the right balance between cost, reliability, and service?)
• Communication
• Reputation
• Finances
• Security
• Partnership (do they want to partner with you or just see you as a funding source?)

Ultimately, choosing suppliers is probably the single most important part of your role, so any tools dedicated to the task can be greatly beneficial.

Optimization

FInding high-quality suppliers requires some dedication and due diligence. Sometimes,

Constant improvement is essential for any organization to thrive. Tailoring your sourcing to your own business needs is certainly a common-sense approach, but it’s replete with challenges. The best way to optimize this is to automate some of the processes. That will help you analyze and spend more time looking at supplier bids while also enticing potential suppliers to bid a bit more creatively. Ideally, you want to find favorable terms for both your company and the supplier without breaking the bank or running into issues with third-party risk. Gaining insight into your suppliers and running scenarios to determine how they might perform relative to your supply chain is useful for identifying more (and better) opportunities.

Automation and Integration

A big part of a good strategic sourcing strategy comes with integrating everything together in one place. Contracting, purchasing, invoicing, spend classification, and opportunity alerts best serve an organization when they’re in one place. Using a comprehensive and automated strategic sourcing solution as part of your enterprise management system (or other systems in place) removes the complexities of some of the finer points of sourcing. It also opens up better opportunities to grow and develop along with your suppliers. Automating some of your more routine/standard tasks frees up time to dive into the more complex situations that may require more attention to detail.

Risk Management and Compliance

Risk is an inherent part of doing business. Third-party risk, natural disasters, cost fluctuations, and even changes in industry regulations can all cause issues that put a damper on your plan. So what’s a good way to mitigate this or work around the problem? As part of your standard third-party risk assessment and company policies, you should be sure to check out all of your bidders according to company policies. Obtaining all the correct information to do the assessment and plugging it into your automated software solution can help you make better decisions in real-time. You can suss out a potential threat or reject a bid from a risky vendor easily, largely thanks to the artificial intelligence and machine learning capabilities of the software. It compiles and assesses the critical data you need to ensure compliance with every potential contractor and drastically reduce third-party risk before it can become a significant problem.

Classifying Spend

Another essential part of strategic sourcing is understanding and evaluating spend. A good strategic sourcing strategy gives managers a window into their spend, with much higher visibility into all aspects of an organization’s spend. This includes rogue spend, potential fraud or rogue spending, quantities, business units, supplier payments, payment terms, negotiations, contracts, and more.

In this part of the plan, you need to be able to accurately answer the questions of what’s being purchased, who’s buying what, where it’s coming from, quantities, terms, and payment amounts. Spend analysis involves examining, identifying, and extracting pertinent information to help inform your overall strategy. It requires consolidating different areas of spend, merging data, classifying information, and spending significant time poring over relevant data to understand your company’s spend. That’s why visibility is so important. Getting a better grip on spend analysis comes with automating much of it and using that data to inform your strategic sourcing plans.