Global Supply Chain Group’s Guide to Strategic Sourcing
Strategic Sourcing is not new, but there are new things in Strategic Sourcing
There are large consulting firms who have made a business out of strategic sourcing for 30 years or more.
So, what is unique about strategic sourcing, and what is new in this field?
How has the field of strategic sourcing evolved over the past three decades? What is state of the art in this field?
What will win you the deal points, and the accolades from the peers?
What will not be regarded as out of date knowledge?
If you have no interest in the field of Strategic Sourcing, then clearly this guide is not for you. Also, if you regard yourself as an expert who is fully conversant with state of the art in strategic sourcing, then you will hardly benefit from any report of this kind.
Do you want to save a lot of money by bettering your company’s purchasing practice?
On the other hand, if you want to continually push the boundaries and get better in the field of strategic sourcing, buy this report. Also, if you are a novice to the discipline of strategic sourcing, then this report will help you immensely with the sound fundamentals as well as the cutting edge tools in the field of Strategic sourcing.
Astute CEOs and CFOs already know that in the buyers market, you do not make any money in sales. All the money you make as a company is in smart purchasing. With rampant discounting, it is barely possible to make any margin on the sales.
On the flip side, if you are not availing your company of the best possible prices and terms from your vendors, you are leaving your company vulnerable to grinding market forces.
That is where strategic sourcing comes into the picture.
Strategic Sourcing carries a heavy burden today – it frequently saves the entire company
You can use this guide for building or rebuilding the strategic sourcing process within your company. On the other hand, if you already have a well functioning strategic sourcing process, and want to tweak or streamline it to make it even better, this guide should give you ideas for doing the same. Finally, if you are a newcomer to strategic sourcing, this will provide you with a good grounding in the field.
Traditional purchasing or even procurement is not the answer
Traditional purchasing is sporadic and opportunistic, never strategic. Procurement can be systematic yet tactical. Sourcing must be strategic and in step with the rest of the supply chain strategy. That is where most of the strategic sourcing experts fall short – they miss out the big picture.
Someone has to make up for the heavy discounting at the till
The sad reality is the salesforce has to yield to competitive pressures on prices while selling. Your customers themselves deploy the world-class strategic sourcing techniques and will not leave a single penny on the table. The only way your business can still make a profit is by making sure that your company’s purchasing is equally professional.
Aggregating the spend across the divisions, and the lifetime cost comparison is just the beginning
There was a time, in the nineties and beyond, when just aggregating the spend across the company gave you humongous leverage in your negotiations with the vendors. The discounting achieved through a high volume purchases were enough to justify high fees of the management consulting firm you hired to do a strategic sourcing project for you. Similarly, aggregating across time by negotiating for life cycle cost of the product or similar arrangements can only take you this far. What lies beyond spend aggregation?
Don’t just claim your value, prove your value
Procurement has always struggled to engage with the business for the simple reason that they claim a lot more value than they can visibly demonstrate. Working alongside some of the best CPOs in the world has taught us the best way to prove their value.
How to make the business WANT your involvement?
Almost anyone can call himself (or herself) a purchasing expert. They just need to be able to sign their name on a contract. Your business is already full of these experts.
Why would they welcome help from a strategic sourcing team, or any other staff function unless they bring something extra for which the business does not have time, expertise or patience?
How to discover the ‘black swan’ – the hidden leverage – of every deal
If you don’t look, you will never find it. Every commodity market is different, and every deal is different. Yet, all the best ones all have one thing in common – ‘the black swan’ — the unexpected hidden driver which could swing the deal in their favour.
If you don’t know where to look, you will look in all the wrong places. That is the reason aggregation does not provide too much leverage any more. Based on our hundreds of projects – in commodities as diverse as high-grade graphite, heliostats, logistics, precision engineering, explosives, speciality chemicals, shipping, contract manufacturing, telecoms etc – we can share some of the ‘black swans’ we have discovered in the past, and the process we frequently deploy to uncover them.
How could you turn around your life as a strategic sourcing professional
Let us face it, procurement professionals are not the most loved professionals within any company. Rest of people resent the restrictions, the constraints and the strictures imposed on what they feel is their domain, their own business. In fact, in some cases, they are not even convinced of the reason for the existence of the strategic sourcing teams within their companies.
Unfortunately, many CFOs and even CEOs share that view – based on what they have seen in the past.
Get out of bureaucratic existence – ticking the boxes and collecting the paycheck
If you persist with out of date procurement or strategic sourcing practices that is all you would be doing. Going through the motions for the sake of being seen to be doing your job. Without adding much value, without enthusiasm, and without any joy of work.
Is there a better way?
Lead a meaningful professional life in purchasing, procurement and strategic sourcing – full of recognition and value-added
This report has been written after decades of experience observing both sides of the table in a multitude of companies. Our teams have been part of the struggles of many competent individuals working in bureaucratic companies, as they worked tirelessly to make the transitions to a value-added strategic sourcing team.
This transition is never easy but is immensely satisfying – both to the company and to your team. Once you get to practice ‘hunting for the black swan’ in every deal, you will never go back to the ‘tick the box’ procurement regimes so prevalent in bureaucracies. That does not mean that you ignore the basic housekeeping. It means that you go beyond the basics and bring the extra firepower to the negotiating table. You find hidden gems that work for both parties – without bankrupting either.
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