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Strategic Sourcing

Optimizing the procurement function allows businesses to benefit from greater cost savings and improved performance. However, this is a company-wide engagement, often requiring assistance from multiple departments in the organization. Strategic sourcing is one of the best ways for companies to improve their overall performance and gain a competitive edge. 

What is Strategic Sourcing?

Strategic sourcing is a procurement function that helps companies better understand their spend profile, through a series of steps including spend analysis, data collection, market research, and contract negotiations. It is a key component of supply chain management as it allows businesses to consolidate their purchasing power to better align its procurement strategy with the company’s goals. 

Strategic sourcing can be broken down into several steps, including:

  • Spend analysis: by collecting data and analyzing it, companies can gain a better understanding of where money is being spent, as well as opportunities for reducing costs. 
  • Sourcing opportunities: by streamlining the vendor onboarding process, companies can issue RFPs to solicit bids from different vendors, creating healthy competition and strategic sourcing opportunities. 
  • Negotiating better contracts: using automated contract management tools, companies can review contracts and negotiate better terms. All contracts are stored in a digital database, allowing companies to set alerts for renewals or for specific dates. 
  • Reviewing and benchmarking performance: it’s also critically important to track the results of your sourcing strategy so that you can benchmark performance and monitor results until the organization is able to maximize its value. 

Benefits of Strategic Sourcing

Strategic sourcing offers many benefits to organizations. Many of these are far-reaching, affecting different business units. Here are a few:

1. Increased Cost Savings

Arguably the biggest benefit of strategic sourcing is greater cost savings. Since companies will carefully select vendors based on defined criteria, they can reduce procurement costs. This money can be reinvested into other business operations to maximize value. 

2. Increased Productivity Through Automation

One of the key drivers of strategic sourcing is increased productivity. Since strategic sourcing is possible via AP automation tools, it allows AP teams to cut down on manual labor, making it easy for them to focus on more high-value tasks. Key processes, such as vendor onboarding or document submission, can be automated through a self-management portal. 

3. Better Vendor Relationships

With strategic sourcing, organizations can improve relationships with vendors drastically, improving synergies between their trading partners. This is possible because the organization is able to better align its sourcing strategy with its business objectives. 

Vendors feel valued, and they’re more motivated to help the organization achieve its objectives as a result. Organizations can also benefit from improved terms and discounts. 

Implement Strategic Sourcing Using SoftCo eProcurement

SoftCo Vendor Management allows businesses to augment their procurement strategy. It delivers all the benefits a business aims to achieve when working with their preferred vendors. It simplifies the onboarding process, and guarantees AML compliance for vendors. 

It offers real-time data regarding key vendor activities, so you have a clear idea about vendor spend and risk. It also benefits vendors since they can gain more clarity over the status of orders or invoices.