What is Strategic Sourcing & How Does it Benefit Your Business

The optimisation of procurement practice should be a key concern for any organisation or business leader who is looking to grow and develop their supply chain. Better supply chain management can cut costs, improve quality control and simplify business operations.

Strategic sourcing is often seen as the pathway to superior supply chain practice. Deployed by large corporates and small businesses alike, strategic sourcing has the potential to secure important developments in supply chain efficiency and create business partnerships that prove highly beneficial for both buyer and supplier.

In this blog, we’ll cover the essentials of strategic sourcing. Our eSourcing and procurement experts will look at what strategic sourcing is, what strategic sourcing can do for you, and how you can deploy your own strategic sourcing campaign.

What is Strategic Sourcing?

Strategic sourcing is a cyclical process. The most important thing to know about strategic sourcing is that, if you’re doing it properly, you’ll never stop engaging in the practice.

Strategic sourcing involves evaluation and re-evaluation of your procurement strategy, supplier onboarding process, contract tenders and supplier management activities. The overall aim of strategic sourcing is to optimise your supply chain to be as effective and efficient as it can possibly be.

Traditionally, this would be looking for ways to acquire the best resources available for the lowest possible price. However, supply chain optimisation can go beyond pricing and look to other factors, such as supply delivery efficiency, long-term relationship development and the alignment of desirable supply chain practices, including sustainability initiatives or Environmental, Social & Governance (ESG) criteria.

The end result of strategic sourcing is to always be looking for ways to improve upon your procurement to perfectly align your supply chain with the business objectives, goals or targets you have at that current moment in your business lifecycle.

How Does Strategic Sourcing Work in Practice?

Strategic sourcing is all about looking at specific elements of your procurement process and enhancing said process to better benefit your business. Often, this is done within the acquisition of suppliers or contract management stage. By performing an ongoing strategic analysis of market opportunities, supplier developments, changes to your industry and so on, you can start to build a bigger picture of where you might be able to improve your supply chain.

This works in the opposite way to a ‘set it and forget it’ approach to sourcing. Instead of finding a supplier or collection of suppliers that fit your present needs and continuing to use them as you found them well into the future, strategic sourcing has you evaluate how effective your suppliers might be and uncover better opportunities.

For example, through strategic sourcing you may:

Identify a great supplier you are currently working with that has developed new platforms for the supply of goods or services. For example, construction suppliers may expand the kind of services they offer. By identifying these new opportunities to source different contracts from a single supplier, you can streamline your supply chain and cut down on the number of suppliers you with, or;

You may find a supplier that used to be cost-effective is no longer providing you with valuable services, or;

That you can find higher quality services elsewhere, or;

That while on the surface your suppliers appear strong, underneath they lack the risk management support structures necessary to protect your business against potential procurement problems. This is especially true during and following the COVID-19 pandemic. In these unprecedented times, supply chains are being tested as they never have before.

By identifying problems or opportunities, you can make changes.

What Are the Benefits of Strategic Sourcing

They are a number of key benefits to the strategic sourcing process:

• Reducing Costs – Strategic sourcing helps you analyse your supplier market and find ways to cut down on costs, whether that’s direct cost savings through reductions in supplier pricing or finding more efficient supplier processes that save on operational expenses.
• Simplify Procurement – By working to improve the way you procure resources, you can also monitor and optimise the way you manage your procurement activities, which can result in simplified procurement that is both easier for your team and your suppliers to engage with. Clarity with procurement is important for avoiding mistakes and building stronger strategic partnerships.
• Safeguard Your Business – Supply chain risk must be mitigated where possible. Supply chain disruption and delays can have massive cost implications that no business wants to deal with. Strategic sourcing can be used to continuously evaluate suppliers against risk management criteria, such as maintaining important accreditations and providing ongoing staff training, allowing you to respond to new or developing risk factors.
• Align Suppliers with Business Goals – As your business develops and grows, your goals will change. For example, many businesses are now adopting new ethical work policies such as sustainability or workforce inclusion/diversity. The ‘set and forget’ mindset to procurement can mean you end up working with suppliers that go against your changing values or business goals, whereas strategic sourcing ensures you build and maintain relationships with those suppliers that are aligned with your business. 

How Market Dojo Helps You Build Your Strategic Sourcing Process

Market Dojo offers powerful on-demand services that promise flexible opportunities for businesses of all sizes to optimise their supply chains through strategic sourcing.

Our full suite of tools includes our flagship product, Market Dojo, our unique eSourcing platform designed to help you run eAuctions and put out tenders for supplier contracts; Category Dojo, Market Dojo’s industry-leading sourcing analysis software that is purpose-built to support strategic sourcing through advanced data processing and defining market strategy; and, SRM Dojo, our supplier management optimisation tool that allows you to build stronger supplier relationships and cultivate strategic sourcing developments through seamless supplier communication, activity monitoring and data tracking.

With Market Dojo software, you can create a fully-formed and easy-to-manage approach to strategic sourcing and procurement optimisation. From using our eAuction tools to compare opportunities, negotiate and align suppliers to your business goals and budgets to using SRM Dojo to develop robust relationships and maintain supplier information, Market Dojo is your go-to service provider for better sourcing solutions.

Our on-demand services really are on demand! Discover month-to-month eSourcing subscription packages that don’t tie you to contracts, alongside free plans and opportunities to try out our full suite of eSourcing software services. Start getting the most out of your procurement today and begin your strategic sourcing.