Introduction to strategic sourcing, contracts, and. The scope of strategic sourcing extends beyond supplier price negotiation and takes. How to strategic sourcing chapter 4 procurement and. Strategic sourcing involves the establishment or modification of acquisition vehicles to better address federal government procurement needs and or more effectively leverage spend, market position, market knowledge e. A procurement management plan must provide procurement strategies that will allow the business to maximize its benefits in the processes of procurement. Strategic sourcing is an approach that procurement organizations use for supply chain management. Strategic sourcing reflects the integration of procurement or sourcing strategy with corporate strategy porter 1998. Corporate procurement and strategic sourcing groups are playing a broader and more strategic role than ever in helping organizations accomplish this task. The best strategic sourcing decision may be to not make a purchase at all russel, 2009. The integration of procurement and corporate strategy is reflective of the transformation of purchasing to supply management. Strategic purchasing young procurement professionals.
Profile of the procurement managers has changed and expectations from these managers are different. The core of strategic sourcing, it comprises the allocation of resources to define and implement strategies to conduct category negotiations and business relations. Information is gathered and used to enable an organization to leverage its consolidated purchasing. As businesses today continue to harness the power of globalization to expand performance, the role of effectively sourcing goods and services from suppliers has become inevitable. In the past 3 years, procurement volumes have grown significantly in the health, elections, sustainable energy and crisisresponse sectors. Strategic sourcing is organized since some type of methodology or process is needed. Cips defines reactive sourcing as being the procurement approach where no proactive sourcing strategies have been put in place and so the purchasing and. Heres the fourth installment, you can download the full pdf at the end chapter 4.
We proudly present the resulting ebook of this years project strategic purchasing. However, strategic sourcing can go well beyond cutting costs. Strategic sourcing decision making is the scope of this master dissertation. Unlike a transactional based purchasing approach that responds to a need by initiating a solicitation and executing a contract, a strategic sourcing approach.
General motors initiated systematic strategic sourcing in the. To access the menus on this page please perform the following steps. Strategic sourcing throughout the product lifecycle. Oct 06, 2016 delta bid have produced a 10 chapter strategic sourcing guide. Furthermore, issues like economic and political volatility, technological disruption. The process is compared to a new iso standard with guidance on strategic sourcing and development of fm agreements. Strategic sourcing emerges as an important factor to support and integrate the suppliers into the supply chain intelligently this chapter aims to provide understanding of how strategic sourcing. As our profession has evolved from the purchasing agent to supply chain mentality, strategic sourcing culminates the transformation as a collaborative process. So, far from being just another strategic sourcing tool, gep smart is where sourcing forms a critical link in the chain from savings opportunities to realized savings. What it is what it is not focused on the total cost of ownership tco incorporating. Strategy sourcing is an approach to procurement whereby the business. As a strategic function of the organization, procurement must be engaged in the. Pdf strategic procurement management lecture notes by. Gep smart sourcing can be used as a standalone application or as part of the gep smart unified procurement platform, alongside spend analysis, contract management, category management.
Developing and implementing a strategic sourcing strategy cips has formulated positions on strategic sourcing as this is a key activity for purchasing and supply management professionals. Strategic procurement incorporates actions aimed at reducing the supplier base, negotiations, communication. Pdf the role of strategic sourcing on global supply chain. The paper investigates a strategic sourcing and procurement process in a large public organisation in denmark based onparticipating in internal meetings, a workshop, document studies and interviews. Procurement planning is the process by which all personnel responsible for significant aspects of a project have adopted specific roles and responsibilities and are integrated in a comprehensive. Information is gathered and used to enable an organization to leverage its consolidated purchasing power to source the best possible values in the marketplace. For example, in april 20, dod was assessing the need for additional resources to support strategic. It is a systematic procurement process and one component of supply chain. The cips body of knowledge is eloquent on the definition of purchasingbut was scant on the definition of procurement. It can have a profound impact on a companys financials and can strongly influence the purchasing and procurement processes. Sourcing strategy providers evaluation and selection. Purchasing is shifting its focus from daily procurement activities to long term, valueadding purchasing and supply chain initiatives.
Strategic sourcing is the dynamic delivery of internal and external, business or itoriented resources and services to ensure that business objectives are met. Modern day procurement managers manage procurement and sourcing function both at strategic and operational levels. Through procurement planning and strategic execution, companies can be more aware of the factors and elements that are necessary to be considered before buying materials and or items or. Strategic procurement management is the process of planning, implementing, evaluating, and controlling strategic and operating purchasing decisions for directing all activities of the purchasing function toward opportunities consistent with the. Strategic procurement incorporates actions aimed at reducing the supplier base, negotiations, communication and maintaining longterm relationships with suppliers ryals and rogers, 2006.
Strategic sourcing is a method of managing procurement processes for an organization in which the procedures, methods, and sources are constantly reevaluated to optimize value to the organization by. Ofpp strategic sourcing strategic sourcing ofpp a structured and collaborative process of analyzing an organizations spend and using the information to make business decisions about acquiring commodities and services more efficiently and effectively 4. Unlike a transactional based purchasing approach that. Strategic sourcing is an approach to supply chain management that formalizes the way information is gathered and used so that an organization can leverage its consolidated purchasing power to find the best possible values in the marketplace. Ofpp strategic sourcing strategic sourcing ofpp a structured and collaborative process of analyzing an organizations spend and using the information to make business decisions about acquiring.
Procurement function is considered to be a strategic initiative and seen to be adding value to entire business process. A model of best practices for a sourcing process semantic scholar. A strategic approach involves understanding the importance of the procurement to the agency in achieving its outcomes, sourcing suppliers and managing relationships to successfully deliver against. Procurement accounts for nearly two thirds of all undp deliveryand the demand for procurement services is growing. Public procurement practice strategic procurement planning. What is strategic sourcing and why is it important. Strategic sourcing is a well established and proven method for managing largescale, medium. Strategy sourcing is an approach to procurement whereby the business needs of the organization are matched with the supplier market.
Strategic sourcing is the dynamic delivery of internal and external, business or itoriented resources and services to ensure. Additionally, purchasing executive performance is often. Mppm chapter 3 strategic sourcing and category management. A strategic approach involves understanding the importance of the procurement to the agency in achieving its outcomes, sourcing suppliers and managing relationships to successfully deliver against public policy objectives and business needs, whilst delivering. Strategic sourcing institute for supply management. Sourcing, purchasing, suppliers, procurement, best practice, model. In addition, the individual will be responsible for all phases of sourcing that require the. Major changes are currently taking place within purchasing functions of manufacturing firms.
The integration of procurement and corporate strategy is reflective of the. Agencies have not fully adopted a strategic sourcing approach but some have actions under way. Purchasing is shifting its focus from daily procurement activities to long term, valueadding purchasing and supply. Additionally, procurement is transforming into a more strategic function that is aligned to organizational goals and objectives. However, the single most important aspect of a procurement strategy is to have one. Strategic procurement management is the process of planning, implementing, evaluating, and controlling strategic and operating purchasing decisions for directing all activities of the purchasing function. Strategic sourcing is an approach to supply chain management that formalizes the way information is gathered and used so that an organization can leverage its consolidated purchasing power to find the.
Lets take a look at the difference between the two so you can better understand which term should be used and when. Developing and implementing a strategic sourcing strategy. Chapter 11 it procurement planning and strategic sourcing. This involves data gathering around the operating environment, supply markets, and key risks. In the past 3 years, procurement volumes have grown significantly in the health. Heres the fourth installment, you can download the full pdf at the end. Strategic sourcing is a method of managing procurement processes for an organization in which the procedures, methods, and sources are constantly reevaluated to optimize value to the organization by allowing them to buy more effectively and efficiently. For purposes of this paper, strategic sourcing will be defined as the. Whether we call it purchasing, procurement, supply management, sourcing or buying it is. The ultimate guide to strategic sourcing purchasecontrol.
Pdf the role of strategic sourcing on global supply. The 7 steps of a strategic procurement process trade ready. Strategic acquisition center sac office of procurement, acquisition and logistics opal skip to page content. Strategic sourcing methodology chapters covered all of the preparation ne. Surprisingly,elsewhere in the world,the purchasing word remains prevalent. The bestpractice templates for projects, sourcing events, contracts, and more are based on geps global procurement expertise. Strategic acquisition center sac office of procurement. It can have a profound impact on a companys financials and can strongly. Strategic procurement planning should begin with a mission statement. Mastering procurement a structured approach to strategic. Strategic sourcing solutions optimize supply chain i ivalua.
The next steps are purchasing and procurement management which are established after sourcing and strategic sourcing to execute upon the contract and to. Without a strategic approach, no overall view of the sourcing costs and efficiency is taken and the profits of the business are effected. The strategic procurement planning approach described in this note follows three main steps. Before you can procure materials from your suppliers, you must first find and vet those suppliers. Evolving from its roots working with the manufacturing industry to more cost effectively purchase raw materials, strategic sourcing is now charged with finding cost effi. Each week, pasa will be bringing you a new chapter. Strategic sourcing decisions are, for example, makeor buy decisions and supplier selection. It is much more than simply centralizing procurement.