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Seven steps to strategic sourcing

Combine a volatile global economic environment and an increasingly interconnected, interdependent supply chain, and the result is a series of significant challenges for procurement and sourcing organizations.

But along with challenge comes opportunity. By reducing cost, decreasing or eliminating expense, generating cash, managing risk and improving profitability, these organizations can create a new roadmap for the supply chains of the future.

The IBM Institute for Business Value recommends a seven-step process for developing a strategic sourcing approach:

1. Conduct spend analysis: Collect and analyze category baseline spend data and then identify potential opportunities and re-evaluate project scope.

2. Determine business requirements: Assess current and future business needs, and challenge internal customer requirements to identify opportunities to reduce costs while enhancing quality and service.

3. Conduct market analysis: Understand the supply market in order to form category strategies that match business requirements with supply market capabilities.

4. Develop category strategy: Select the most appropriate market sourcing strategy for the category by identifying the potential strategic alternatives and analyzing each option.

5. Select suppliers and negotiate: Provide a fair, consistent and structured approach to the identification, evaluation and qualification of suppliers, as well as the subsequent selection of suppliers that support business objectives.

6. Develop implementation plan: Provide a structured approach to developing supply transition plans.

7. Manage supplier performance: Maintain the performance of internal users and the supply base, the meeting of business requirements and contractual terms, the capture of savings and benefits, and the improvement of supply relationships.

By adopting a strategic sourcing approach that includes these initiatives, sourcing and procurement can help drive efficiency, productivity and – ultimately – business results.

Download the complete IBM Institute for Business Value study

About the author

  • Karen Butner

    Karen Butner

    Supply Chain Management Lead, IBM Institute for Business Value

  • IBM

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