Strategic sourcing goes beyond standard models of supplier contracting based on getting by and doing just enough to enable other units of the business. When companies embrace true strategic practices, they turn their procurement departments into autonomous units that are out to save money and proactively improve the organization's situation. However, that is easier said than done in numerous situations.
There is no one element that will improve sourcing all on its own. Procurement leaders are tasked with creating just the right balance within their departments. This means assembling the right team for the job and giving them all the help they need - from tech and management perspectives - to transform the way sourcing is carried out.
State of the industry
Spend Matters recently delved into the most recent edition of the A.T. Kearney Assessment of Excellence in Procurement study. This is a way to determine how far the average company has gotten in its efforts to implement strategic sourcing, and to determine the mix of practices that can make a department better. The basic formula is that companies need long-term management plans, top talent and high-quality agreements with suppliers.
Getting to this goal means never letting up on core processes such as active recruitment and digital transformation, even if a company finds itself in a leading position within its particular corner of its industry. Establishing the kinds of contracts that A.T. Kearney recommends, in which procurement departments establish in-depth collaboration with their top suppliers, doesn't work without diligent and frequent attention to detail. Elements such as risk management and total cost of ownership calculations aren't useful without consistent attention from the procurement department.
Helping companies get to this state of engaged progress are top staff members. As Spend Matters reported, the A.T. Kearney survey found the best-performing procurement departments often spend a large percentage of their budgets on full-time workers brought in for strategic purposes. Increasing automation use can be applied to the less important and thought-intensive processes, which leaves more staffing money for strategic leaders.
The above advice is straightforward, but some of the practices have yet to catch on universally. For instance, Sourcing Journal recently noted that digital maturity in the apparel sourcing supply chain remains somewhat elusive today. More than half of companies asked stated that their implementation of technology falls into the "low" or "very low" level. Leaders generally realize the speed that comes with technologies such as the cloud, connecting them to their suppliers and enabling quicker reactions to market forces. However, many among their number are still moving toward this goal.
Digitization is viewed as a cost and speed solution. Of course, those two metrics are closely related. Supply chains that become significantly faster will ideally be able to use this responsive nature to reduce their overhead. Then, beyond the digital horizon, there is yet another generation of technology beckoning. Sourcing Journal pointed to new and more effective digital communication and product design strategies reduce the time it takes to work with suppliers and get products to market. Many companies are still making effort to get in line with today's best practices. Once they do, the next steps await.