Small businesses in the USA are increasingly using technology across disciplines to grow, attract top talents, and sell their respective products and services. Thus the need for strategic sourcing solutions is also growing day by day. These 3 S implies an approach to supply chain management that formalizes the way in which the information is gathered, transferred and used for the benefit of an organization. Through this, an organization can leverage its consolidated purchasing power to find the best possible values in the marketplace. Strategic sourcing requires an overall analysis of an organization such as what it buys, who are its target customers, etc. and on that basis, a strategy is made to draw the benefit of an organization. Don’t confuse strategic sourcing with conventional sourcing. Strategic sourcing differs from conventional purchasing as it puts emphasis on the entire life-cycle of a product and not just its initial purchase price. Strategic sourcing also helps the procurement professionals to fulfill their dual roles for supply and cost management of the organization. Thus, it is very advantageous for a company to get strategic sourcing as a proactive, information-guided approach to procurement of a reactionary or fulfillment behavior of an organization.
Strategic sourcing software modules
For more unified sourcing management, agencies employ various strategic sourcing modules. These modules facilitate the approach more, by standardizing sourcing requirements and providing users with federated data technology. It helps in sharing information about products, markets, business needs, etc with the client organization in real time. Different organizations have different procurement software and are mostly sold within the enterprise resource planning system only. Sourcing management software makes it quick and easy to get the best market price for all goods and services rendered by an organization, removes barriers between sourcing and purchasing to run compliant process efficiently, such as the ability to score on specific attributes and weight scores, etc.
Benefits of sourcing management
While strategic sourcing is widely practiced in large and small scale organizations, fewer small and mid-size operators have discovered its value and explored how to implement this strategy in their own organizations. It’s not that large operators are the only ones who can stage and sustain a strategic sourcing initiative small organizations also entertain the benefits of it. Strategic solutions help an organization in the following ways:
Reduce and control procurement costs: By studying data and other negotiable capabilities of an organization, sourcing management helps in reducing and controlling procurement costs and increase the agility. It helps in eliminating the business’s overhead burden required to manage the suppliers’ lifecycle, analyze and access the information and their performance in the marketplace.
Maximize the value of every dollar of spend: An estimate of 70% of potential procurement can be achieved through strategic sourcing. In 2005, the government launched the Federal Strategic Sourcing Initiative (FSSI), to offer federal agencies a way to purchase Maintenance, Repair and Operations (MRO) equipment and supplies at below-current government market prices. This solution helps small business to streamlines product offerings and reducing the need for standalone agency contracts.
Streamline procurement options: Sourcing management helps in optimizing procurement processes and thereby maintaining fast and focused functions to run. This is because, without a mature and generalize strategic procurement function to influence, control and report organizational spending, it is impossible for an organization or a business to fully leverage its total purchasing power and create the value and service levels that are required from third party suppliers.
Build strong and trustworthy relations with existing and new vendors: Through detailed studies on the products, their existing market reputations and delivering the information in real time, it is very easy for an organization to build a strong a trustworthy relationship with the existing and new vendors. It also helps to increase and expand your business smoothly in a shorter period of time.
Processes involved with sourcing management
There are a number of processes through which a perfect strategic process should go. These processes are not only necessary but also make the management smooth and authentic.
Step 1: Determining the product: Understanding everything about the product is the first step in the strategic sourcing process. This means defining the category, the current quantity used, types and sizes, the end users of the product, are the processes used and involved in the supply chain, etc in the well-documented form.
Step 2: Analyzing the supply market: Identification of potential new global and local suppliers is the second important process for strategic sourcing. It is necessary as the study of cost components of the product or service helps in the suppliers’ marketplace to manage the risks and opportunities. Key raw material and other variables such as labor and transportation pricing and calculations are also important suppliers’ cost elements and are done in this phase only.
Step 3: Strategizing: Based on the above studies, there comes the need for strategizing the idea such as the cost, review management, supply prices, etc. Sometimes risks and uncertainty also involved business and strategizing through sourcing will definitely help you in deciding where to buy in order to minimize risk and costs thereby. Usually, a cross-functional project team works to study the dependency on real alternative suppliers, the competitiveness of the supplier in the marketplace and most importantly, whether the users are open for new suppliers of the product or not.
Step 4: Determining the sourcing process: The fourth important step necessary to determine what sourcing process one should carry for the procurement solution. This includes product and service specifications, delivery and service requirements, pricing breakdown, and other legal and financial terms and conditions, etc.
Step 5: Negotiating and selecting suppliers: A good strategic sourcing strategy conducts multiple rounds of negotiations to shortlist the suppliers. The final selection process is usually done by the team on the basis whether the supplier can provide maximum return or not and then signed off as per the approval process.
Step 6: Implementation and integration: After completion of all the above steps, then the phase of implementation takes place. The implementation programs sometimes vary depending on the degree of changes made throughout the process and then help to simplify the end result from the product.
Step 7: Tracking the results: Finally there comes benchmarking the end results that is after executing the strategy, it is essential to track whether it is beneficial for an organization or it needs to be modified more.
Where to get an ideal sourcing management service in the USA
Hiring a sourcing agency for a complete procurement solution makes it way smoother and hassle-free to run the business profitably. But how will you find an ideal one? To get the best and genuine sourcing application, you need to see the systematic and scalable means for the organization to manage the full sourcing process in a well-maintained manner. This may include contract management, supplier performance management tools, etc. Being a Sourcing agency, we will help you to get the right supplier by proper documentation and contracts and always follow the law and order of our as well as other countries.