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Five myths of strategic sourcing

There are several misconceptions about what the process of strategic sourcing involves. Here are five common myths concerning strategic sourcing.

Myth #1: Strategic sourcing is getting three quotes and done.

This is the farthest from reality. Strategic Sourcing is a longer process involving stakeholder involvement, market research, detailed category analysis, and using technology where appropriate to create value for your organization. This process takes much longer than just getting 3 quotes.

Myth #2: Strategic sourcing can be performed by any person in any department.

The fact that many professional consulting firms have their own specialized procurement people, points to the level of training and expertise needed to perform strategic sourcing. Most people that attempt to source goods and services without the proper sourcing experience simply obtain 3 quotes and are finished. To reap the maximum value from strategic sourcing, professional buyers and sourcing professionals should be involved. http://en.wikipedia.org/wiki/Strategic_sourcing

Myth #3: A great negotiator makes a great purchasing person.

Lawyers for example, are generally great negotiators and smart thinkers, but that fact alone does not make them a great strategic sourcing professional. Strategic Sourcing professionals are well-rounded with typical backgrounds in Finance, Economics, Supply Chain, Logistics, etc. An effective strategic sourcing professional must work “across the silos” of other departments and create value across the entire enterprise. Facilitation and listening skills also get high marks in top procurement and sourcing organizations in North America.

Myth 4: Strategic Sourcing people should be brought into the conversation before a contract is signed.

Depending on the specific procurement process at your company, when to bring in procurement professionals and sourcing experts can sometimes be confusing. It should not be. The strategic sourcing expert should be brought into the buying decision as soon as possible and not at the end of negotiation with a supplier. Generally speaking, the sooner the sourcing expert is brought into the buying decision, the more savings and more value that can be delivered.

Slideshow: What is a procurement contract? (WiseGeek)
http://www.wisegeek.org/what-is-a-procurement-contract.htm#slideshow

Myth 5: One strategic sourcing person is just as good as the next.

This is far from the truth. The thought processes of one professional and approach of reaching value for the organization could vary greatly from someone else. Further, savings results vary widely from organization to organization. This leads me to the conclusion that having an outside firm assist in sourcing could lead to much greater savings than trying to execute a plan based upon solely existing employees. Outside consulting firms could assist you in documenting a better sourcing strategy, a better plan, or sharing world –class best practices with you. The Aberdeen Research Group reports that having a world-class sourcing program yields higher results than groups without a formal program.

http://www.supplymanagement.com/news/2012/top-firms-take-on-strategic-sourcing-processes/

Performing a Gap Analysis is another way consulting firms could assist your procurement group with world-class ideas and solutions regarding your sourcing practices at your company.

Additional links:
http://www.dfa.cornell.edu/procurement/about/strategic/sourcing.cfm

Bryan Eaves is an expert in Strategic Sourcing having performed 100’s of sourcing events and saved millions of dollars for many different companies. Bryan Eaves, CPA, CPSM, C.P.M. 865-805-4356
www.zeroRiskSavings.com
www.BryanEaves.com

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