Strategic sourcing: The best alternative to traditional purchasing

A supply chain management that paves the way how information is gathered , so that organization can use this information to find the best possible inputs in the marketplace is known as strategic sourcing. Kim who happens be the author of business and industrial marketing defines strategic sourcing as management’s mindset to reach the both short and long term goals of the organization simultaneously. Furthermore in simple terms it can be defined as the competitive advantage created by the management of an organization to increase the performance of the organization.

Purchasing vs strategic sourcing
One of the distinctive features of strategic sourcing from purchasing is that sourcing focuses on sustaining and converging the bond between the supplier and the buyer. The main goal of strategic sourcing is to exploit, leverage, compliment and integrate of the different partners in the supply chain. Since strategic sourcing depends on incorporating capabilities and dimensions of suppliers, thus it provides help in the decision making process. Moreover strategic sourcing provides best results and accurate information when compared to traditional purchasing.

Purchasing Strategic Sourcing
Cost Low cost Has the best possible value and makes up to the total cost of ownership
Quality / Quantity Mass discount is given since high volumes are generated Best quality for lowest possible cost
Skills Requires proficiency, analytical and negotiation skills Requires cross functional ,collaborating and self-negotiating skills based on compromises and mutual respect
Location Supplier base Global network
Procedure Deciding what to buy and from whom Comparing different services to make the best quality offer
Relationship acquaintanceship Sustainable and intense
Performance Effective Efficient
Adjustments Make approaches for failure in improvement Approaches for failure prevention

Now many organizational fail in making a good reputation in the market since they don’t know which method is the best available choice for them, hence deciding which mode of business to use can be a deciding factor. Now strategic sourcing provides the best available price for products but it is also expensive.
For a small business firm this could surface as the negative factor since it may not have the estimated the return on investment and could exceed the business turnover, in such cases purchasing should be preferred, now for big farms strategic sourcing is preferred Strategic sourcing rose to power when the purchasing failed severely. Since purchasing only dealt with hiring and locating suppliers, firms failed to keep pace with supply chain optimization and service quality.

#procurement #automation #businesstransformation #efficiency #bestpractice #digitization

Author – Aval Sethi, Founder

Aval Sethi is the founder & CEO of ProTaiga and is based in New Delhi, India. As a result driven entrepreneur, Aval leads Business Transformation and Procurement Automation initiatives focusing on new-age innovation for businesses through his company.

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