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What is Strategic Sourcing?
What it is What it is NOT
Focused on the Total Cost of Ownership (TCO) incorpora8ng customer needs,
organiza8onal goals, and market condi8ons
Focused ONLY on cost
GeBng the best product/service at the best value
GeBng the cheapest product/service
Driven by a rigorous and collabora8ve approach
Ad-‐hoc ac8vi8es involving only purchasing
Addresses all levers for savings Focused on “bea8ng up suppliers”
Decisions based on fact based analysis and market intelligence
Decisions based on opinion, unjus8fied preference, or complacency
A con5nuous process A one-‐5me project or decision
What is Strategic Sourcing?
Defini5on: A systema8c and fact-‐based approach for op8mizing an organiza8on’s supply base and improving the overall value proposi8on.
Amount Paid to Suppliers
Total Acquisi5on Cost
Purchase Price
Scope of Strategic Sourcing? The scope of strategic sourcing extends beyond supplier price nego8a8on and takes into account the total cost of ownership
Demand Drivers Specifica5ons
Procurement Prac5ces
Inventory Prac5ces
Internal Processes
Internal Policies & Procedures
Opera5onal Prac5ces
Strategic Sourcing
Best Prac5ce Sharing
Cost Savings
Increase Quality
Standardize Pricing
Improve Opera5onal Efficiency
Access to New Suppliers
Create Partnerships with Suppliers
Objec5ves of Strategic Sourcing? Objec5ves of strategic sourcing surround the reduc5on of cost while maintaining or improving quality
Objec8ves Improve the value-‐to-‐price rela5onship
(achieve cost reduc5ons while maintaining quality/service)
Understand category buying & management process to iden5fy
improvement opportuni5es
Examine Supplier rela5onships across
the en5re organiza5on
Leverage en5re organiza5on’s spend
Develop & implement mul5-‐year contracts with standardized
terms and condi5ons across the organiza5on
Share best prac5ces across the organiza5on
