Strategic Sourcing

From a historical perspective, I can understand why Sourcing was labeled Strategic. “Strategic Sourcing” is today a part of Procurement’s DNA. Hard to neglect and yet not entirely correct.

A few decades ago, pioneering strategic frameworks raised awareness of procurement and revealed significant cost reduction potentials. Unfortunately, everything that followed that exciting new theory was less about strategy and more about tactics. For example, leveraging competition between suppliers with some analytics hardly deserves the “strategic” label.

The consulting industry further amplified the voguish factor of “strategy” and connected it to “sourcing .”This hasn’t helped.

I believe that “Strategic Sourcing” sends the wrong message to procurement stakeholders – “let’s beat suppliers … strategically!”

Here are a few thoughts from today’s perspective on why using “Strategic Sourcing” as standard procurement lingo is not correct:

Strategies need to be developed and reviewed for categories, suppliers, and risks. They always need to address top internal and external challenges and key business requirements. Also, your overarching procurement strategy needs to address the company’s needs. Finally, every strategy needs to balance global vs. local conditions in the best possible way.

In most cases, Sourcing will be an instrument to implement different strategies in procurement. In some cases, complex sourcing events, sophisticated e-auctions, etc., might require detailed planning but this is not strategy.

Sourcing is a predominantly tactical approach, today mainly supported through e-tools which can hardly be called strategic. The majority of sourcing events are, therefore well planned tactics; step 1, step 2, step 3, and there’s nothing wrong with this.

I believe we experienced significant damage through the language of “strategic sourcing” in fact, I would go as far as to say that “strategic sourcing” is an oxymoron. Nomen est omen – we created a confusing picture of our mission, skills, and expectations. So let’s talk about strategy correctly – let’s use our skills and knowledge to develop real strategies to deliver value for our stakeholders and our businesses.

You want that seat at the table. Just let them know who is really sitting there – a business partner and not a sourcing hero!

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