Improving on Strategic Sourcing

These days, sourcing has become a common discipline in supply chain and transportation management. There is an organizational expectation that transportation modes will be sourced and cost will be taken out of the network with some regularity. However, meeting these expectations while maintaining service year-over-year has become more challenging. To get more out of the market, we need to change the approach, as it is no longer enough to simply conduct a “bid” for transportation capacity. Sourcing professionals have to continuously push the limits of data, technology and the decision-making process to find and deliver value.

In my view, there are five important characteristics to improve upon in order to continuously drive positive sourcing outcomes: scale, transparency, flexibility, accuracy and speed (time to value). In today’s environment, it is not enough to embrace two or three of these characteristics. These qualities are interdependent and you need them all to get the best out of the market and collaborate effectively with your supply chain partners and internal stakeholders. Granted, leveraging these attributes requires organizational alignment, data, technology and efficient decision processes, but when they are all present, we can capitalize on sourcing potential.

  • Sourcing at scale involves dissolving conventional barriers between categories, modes, business units, geographies and other constructs to produce the most comprehensive picture of demand. Providing the supply base an aggregate view of the needs of your stakeholders gives suppliers an opportunity to align their strategic goals and strengths with that of your own organization. This effort yields volumes of data both in the information required to depict demand and in the responses from the supply base. This potentially vast amount of data holds the opportunities for balancing savings, sustainability, service, capacity and supplier mix across supply chains and stakeholders.
  • Transparency is key to keeping the supply base, as well as internal stakeholders, invested in a process that they would normally prefer to avoid. Let’s be honest – carriers do not want to go through this process. Internal stakeholders may be more willing, but the process requires an internal give and take that can challenge even the most collaborative organization. Giving good and detailed information and updates on the sourcing process, opportunities, challenges and performance incentivizes collaboration and adherence to the sourcing initiative. When used correctly, transparency also exposes opportunities in the market and creates healthy competition.
  • Adapting sourcing and decision-making efforts to stakeholders as well as to the needs of the broader organization is necessary for developing operationally viable award scenarios, and it takes flexibility. Adding to that, suppliers have performance goals, requirements and alternative methods to meeting the demand. Being able to include both stakeholder and supplier requirements in analysis requires a flexible sourcing and decision-making framework. These requirements change constantly and have a lot of interdependencies, but frequently deliver value.
  • Accuracy is an obvious requirement, but it can be very difficult to achieve. Data is never perfect! Data can require substantial effort and iteration to prepare for sourcing. Having inaccurate data undermines a sourcing and decision process very quickly, but accuracy does not end there. We have to be able to capture proposals in the right level of detail and expression in order to quantify the costs of service, preferences and relationships as well as the scope of impact.
  • This is not a process that we want to rush, but keeping momentum through the analysis of award scenarios is important to keeping the attention of stakeholders and suppliers. If the process drags on, stakeholders and suppliers will get fatigued and time-to-value will be delayed. An expeditious and thorough analytics process and implementation are a must.

The bottom line is that strategic sourcing is a complicated process that requires a new perspective and improvement each time it is done. One cannot expect to get a different and better result using the same approach repeatedly. We have to look at the sourcing challenge a little differently each time to improve upon it. Evaluating these characteristics of the sourcing process and improving upon them creates both opportunity and value.

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