Research conducted in Western Europe and the United States regarding the identification of trends and development directions in modern procurement points to the growing importance of strategic actions taken in this area (which results from the development of theory and practical applications of supply chain management concepts). This is evidenced by a report titled “The Future of Purchasing Supply,” published by the Centre for Advanced Purchasing Studies (CAPS), which includes a ranking of priorities in purchasing activities. Strategic Sourcing was listed right after e-commerce and cost management.
What is Strategic Sourcing and why is it so important? In essence, it is the search for sources of supply that would guarantee the highest value of offered goods, the lowest total costs, and the highest level of service while ensuring the material availability essential for production. This process covers all activities related to the procurement cycle: from product specification to invoicing and payment for goods or services. It requires the involvement of procurement departments as early as possible so that value and costs can be taken into account when making every decision related to determining the source of supply (cf. Fig. 1).
Procurement decisions are currently more complex than ever. The times when choosing a supplier based on the lowest cost criterion was sufficient are long gone. Strategic Sourcing means more than cost reduction – it influences the level of revenue achieved by the company (taking into account the impact on increasing the level of customer service).
With increasing competition, there is a need to establish close cooperation with suppliers as early as the new product design stage. The goal of these actions is primarily to adapt to rapid responses to variable demand and to reduce costs. For example: cooperation between the supplier and the recipient reduces the need to maintain large warehouses and enables flexible deliveries to a changing production profile.
The benefits of Strategic Sourcing, such as: increased quality, greater speed and reliability of order fulfillment, are becoming just as important as shortening time (production and order fulfillment cycle), reducing inventory holding costs, and the risk of shortages.
The article comes from the magazine “Logistyka” 4/2003.