Going beyond the Seven Step Sourcing Process

Purchasing managers and strategic sourcing professionals often follow a consistent methodology when planning and conducting a sourcing initiative. Having a process provides a framework that, when correctly applied, can produce sustainable savings in a consistent manner. Creativity in the application of the strategic sourcing process will have a dramatic effect on the results achieved, regardless of whether a seven step sourcing process or a customized internal sourcing process is used.

In order to best optimize the results of a strategic sourcing initiative, there are several questions
that should be answered at the projects initiation:
How can we improve our understanding of the sourcing process?
What are the X-factors that arise when executing a sourcing project?
What other considerations should the sourcing professional account for while administering
the strategy?

Two frequently overlooked components of any strategic sourcing methodology involve the collection of innovative market information and the supplier approach strategy. Often during the course of a strategic sourcing initiative, new product developments, alternate technologies, and shifts in spend patterns present themselves. A Creative Sourcing process is dynamic, so the sourcing professional may need to implement a revised or new strategy to adapt to changing conditions and events.

The sourcing professional should consider how and when to approach both incumbent and alternate suppliers during the actual sourcing phase. Imaginative strategies and open communication will help motivate suppliers to present the best proposal and optimize the total project results.

Project Team and the Internal Benchmark

The benchmark will set the foundation upon which the sourcing initiative will be built and measured. Before the benchmark can be established, the project team must be assembled. The project executive or sponsor should identify the best resources both internally and externally to work on the initiative. The project sponsor must ask the following questions to begin to develop the team:
Who within the core sourcing group is best equipped to work on this initiative?
Who can be enlisted from other departments within the company to participate in the
cross-functional team?
Should additional resources be recruited from outside the company? (either consultants or
business partners)
What is the cost of applying these resources?

Determining the best, most cost effective resources will help to ensure that the ensuing process is a focused, collaborative effort that yields tangible results. Once the project team has been selected, the key decision makers must be identified and introduced to the project team. Establishing the roles and responsibilities for each team member at the start of the initiative creates a defined structure to help the process move quickly and effectively.

Filter out subjective thinking prior to beginning the initiative. The sourcing professional should recognize that internal biases may, and usually do, exist. These biases could include anything from previous negative experience with the process itself, former suppliers, or may simply be the opinions of individuals that are subjective and unrelated to the initiative at hand. In some cases, the sourcing professional themselves may hold the biases. In these situations, the professional must make other members of the team aware of their bias, so that other team members can help make the process objective rather than subjective.

Prior established relationships with incumbent suppliers should be approached in an objective manner. Revisit past decisions from previous sourcing initiatives and determine what new opportunities may exist this time around. If possible, approach the sourcing project as if it were for a new product in the developmental stage. Start the initiative with a clean, objective slate.

Lastly, the project teams motivation should be evaluated at this stage of the project.
Are there incentives or bonuses available relative to the success of the initiative?
Are high level executives and management supportive of the initiative?
Does the team have the sponsorship and ability to drive change throughout the
organization?

Positive reinforcement and the idea that the initiative is a highly visible, true team effort is an invaluable component of a successful outcome. Failure to have all of these components in place at the benchmark stage will ensure a mediocre result.

The internal benchmark for recurring purchases should objectively define what has been done in the past (qualitatively and quantitatively) and identify the implications to the spend category of future strategic plans. At a minimum the benchmark should identify what is being sourced, from whom, pricing structure, service level requirements and future considerations.

For new spends, the benchmark should identify the purpose of the expenditure and have some preliminary proposals or cost estimates as a basis for the spend category.
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