Strategic sourcing

The concept of strategic sourcing was popularized in the 1980s and 1990s and is now considered a standard purchasing strategy used by blue chip companies. Strategic sourcing refers to the process of taking advantage of purchasing opportunities by continually reviewing current needs against purchasing opportunities.

It was first established by General Motors in the 1980s and is now a common business purchasing tool. Strategic sourcing is often used for high value services, ad hoc purchases and core large value purchases.

The steps in strategic sourcing are:

  1. Evaluating the current organisation‘s purchasing cycle.
  2. Evaluate what is currently available in the supply market.
  3. Review the cost-benefit analysis using other suppliers.
  4. Review potential vendors
  5. Update current procurement strategy.
  6. Negotiate with potential vendors.
  7. Implement the new vendor relationship.
  8. Review and update the strategic sourcing on a continuous basis.
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