Strategic Sourcing Reduces Risk In Your Supply Chain

It has been reported that the value of shipments for manufactures is somewhere around 54 percent. The value of services to the global economy is important now and will experience continued growth over the years. This growth will result in an increase in the amount that those purchasing will spend for services. With most companies the spotlight is being put on strategic cost management and the sourcing professionals that are responsible for both finding and managing the suppliers that provide these materials and services, this is known as strategic sourcing. This process is an excellent way to get a clear view of your organization's costs, both internally and externally. This view would give you a noticeable advantage in the area of competitive edge. Learn more on
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In most cases, management cost is considered the responsibility of an accounting or finance department because of the sourcing function falls into the area of cost control. However, the organization in charge of purchasing is typically responsible for a great deal of the company's expenditures. The individuals in charge of this process need to have ability to think creatively about different ways to manage the supply base to have a better chance at managing cost. This is important in the supply chain risk management process.

In terms of strategic sourcing, purchasers need to first review and cut the purchased materials, components, and services in terms of their importance to the company and the level of difficulty in accessing these materials. This process of segmenting what is spent allows purchasers to place the correct cost management tools in order to create a foundation for a successful relationship in terms of the negotiation process. There are typically four major categories for segmentation in relation to the supply chain risk management process: non-critical purchases, strategic purchases, leverage purchases, and bottleneck purchases.

Non-critical purchases are generic purchases that have very little importance to the organization as a whole, they are typically geared toward getting the lowest possible price from a group of suppliers. Strategic purchases are the objects that are important to the competency of the company. They typically have a greater risk and complexity involved in the purchasing because of their limited availability or supply. Leverage purchases are items that are purchased on a larger scale. These are stock items that are available from many sources and are listed on the commodity exchange list. Bottleneck purchases require a more long-term capital investment because they are typically project-orientated.