Understanding Strategic Sourcing: Key Concepts in Procurement and Supply Chain Management

Implementing strategic sourcing is essential if you plan to succeed in your dropshipping business or online store. However, it's a complicated and involved process requiring you to understand several key concepts. To make your entrepreneur's journey easier, we've decided to help by demystifying strategic sourcing and its key concepts below. 

 

What Is Strategic Sourcing?

 

Strategic sourcing is a methodology for purchasing goods and services at the best possible prices and terms. Thus, it's crucial to implement processes like data collection, supplier sourcing, and contract negotiations at an early stage. It's also necessary to monitor the entire procurement life cycle to pinpoint the areas requiring improvements.

 

When strategic sourcing is done right, it offers the following benefits:

 

 - Reduces procurement costs

 - Minimizes risks associated with procurement

 - Keeps inventory stocked consistently

 - Ensures purchasing strategy aligns with company objectives

 

What Is Strategic Sourcing in Supply Chain Management

 

As a business leader, you often find it challenging to source products and components during supply chain disruptions. These disruptions occur during armed conflicts, pandemics, and widespread market volatility, negatively impacting distribution networks and logistics globally. Moreover, these disruptions pose a significant risk to your business, as you won't be able to source and deliver the products your customers want.

 

This scenario will undoubtedly lead to customer dissatisfaction and reduced sales in the short term and possibly in the long term. But you can sidestep all this via procurement strategic sourcing.

 

This strategy will help you quickly identify promising suppliers like TVCMALL and build long-term partnerships with transparency and resilience at the forefront. Thus, you'll always be able to offer your customers the products they want, regardless of market conditions or other factors impacting your supply chain. 

 

What Is Strategic Sourcing in Procurement

 

Strategic sourcing in procurement encompasses tasks like analytics and data collection, market research, supplier negotiations, and contracting. However, it doesn't include the purchase of goods, components, and services.

 

There are several goals that you want to achieve with this process, which are as follows:

 

 - Data collection: Gather and analyze data about the market and your spending, allowing you to make more informed decisions.

 

 - Holistic approach: Reducing costs is a key goal, but you must also assess product quality, innovation, and reliability. Therefore, it's best to partner with suppliers that stock high-quality brands and certified products.

 

 - Supplier partnerships: Build strong partnerships with suppliers that offer the best products, consistently good service levels, and innovative solutions that make product sourcing a breeze.

 

 - Company objectives: Strategic sourcing must closely align with the goals of your business.  

 

Workday Strategic Sourcing

 

Workday is a powerful and versatile app for streamlining the strategic sourcing process. It's ideal if you don't have the time to spend hours on supply sourcing and management. It features an attractive and intuitive user interface (UI) and a fully featured dashboard to help you stay on top of all the source-to-contract procedures.

 

The top-rated strategic sourcing app (4.8 stars according to Gartner Peer Insights) has won over users because it makes launching sourcing projects, gaining real-time data on lead pricing, and automating workflows easy. 

 

According to Workday, most paid users successfully launch their initial sourcing initiatives within 30 days, while 99% enjoy an ROI within the first year. Moreover, you can use it with our one-stop China product sourcing solution to save time and put your business on the fast track to success! 

 

 

Strategic Sourcing Process

 

Kearney, a business management consultancy firm with offices globally, invented the strategic sourcing process. It's a seven-step process designed to improve an organization's supply chain and shield it from risks and disruptions. Here's a detailed summary of these steps:

 

 - STEP 1: Pinpoint the goods, components, and sourcing category you require for your business.

 

 - STEP 2: Conduct a thorough analysis of the supply market. You must investigate all potential suppliers and assess the quality of their product offerings and ability to supply you reliably.

 

 - STEP 3: Pick out the suppliers that will be a good fit for your business based on their ability to deliver quality products cost-effectively and reliably. Ensure that you also pick several backup suppliers to further bolster the reliability of your supply chain.

 

 - STEP 4: Draft Request for Proposal (RFP) documents and send them to suppliers to commence the bid process. Shortlist the suppliers that deliver the most promising proposals for your needs.

 

 - STEP 5: Commence the negotiation process and use the RFP documents as leverage.  

 

 - STEP 6: Integrate your sourcing process into existing business operations and projects without disrupting them.

 

 - STEP 7: Closely monitor and track supplier performance during the procurement life cycle. 

 

In Conclusion

 

Strategic sourcing helps you reduce costs and minimize risks, especially those caused by significant supply chain disruptions. Platforms like the TVCMALL one-stop sourcing solution and Workday will help you unlock the maximum value of your supply chain, make it more resilient, and manage it effectively. Contact us today to learn more about our phenomenal products and world-beating wholesale business opportunities.