I hope that you have enjoyed the article “The 4 Missing Strategic Sourcing Goals.”
“The company needs to save money.”
“Strategic sourcing saves money.”
“Let’s do strategic sourcing.”
Such is the thought process behind many a strategic sourcing initiative since the phrase was coined. But, all too often, the strategic sourcing label has been applied to sourcing activities that were anything but strategic. If a sourcing process’ lone goal is to save money – or, more specifically, to reduce purchase prices – it is not a strategic sourcing process.
Imagine a sourcing process that leads to a 1% price reduction but the new supplier has such poor tech support that it leaves everyone in the buying organization frustrated, distracted from their core work, and suspicious of everything that the procurement department will do for the next three years. Is that strategic sourcing?
Imagine a sourcing process that leads to a 2% price reduction but the new supplier can’t deliver on-time, forcing the buying organization to increase its inventory levels by 20% just so it doesn’t get caught in a stockout situation. Is that strategic sourcing?
Imagine a sourcing process that leads to a 5% price reduction but the new supplier ships so many defective items that the buying organization’s production line shuts down and it has to make emergency purchases from the just-ousted incumbent supplier. Is that strategic sourcing?
None of those examples are strategic sourcing. Sourcing, maybe. Strategic sourcing? No.
Don’t let your own activities be the next example. Source strategically and address all of the strategic sourcing goals, not just saving money. Because when employees spend more time than necessary on tech support calls, or inventory has to be increased, or production lines shut down, any savings may be more than offset by additional costs.
That’s not strategic. That’s not good.
To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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