Like many business improvement ideas, strategic sourcing may affect your company both as a customer and as a supplier.

You can use the insights of strategic sourcing to bring your company’s selection of suppliers in line with long-range business strategy. Or if your company’s main business is to supply goods or services to other companies, you can strengthen sales by aligning market offerings with the strategic goals of potential customers.

Systematic Review
Strategic sourcing is a systematic approach to acquiring goods and services to support the broad needs of the business. It requires methodical review of operational, financial, and administrative goals and careful review of market offerings going beyond price. The goal is to choose suppliers that can offer the highest value across a broad range of measures.

Total Cost
Strategic sourcing requires looking at the total cost of a product. Lower-priced products may end up being more expensive if maintenance and repair costs are high. And if poor performance from a bargain purchase causes you to lose business, it’s not a bargain.

Consolidated Power
Another tool of strategic sourcing is to consolidate purchasing power by making sure that the company combines buying activities as much as possible.

Greater Teamwork
Strategic sourcing narrows the number of suppliers to encourage teamwork between the company and suppliers. Closer collaboration creates opportunities for greater standardization in contracts and improvements in measures of cost, quality, and time.

Reduced Waste
Combining related purchasing decisions eliminates wasteful repetition of activities, reduces the number of purchase orders, and cuts inventory costs.