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Strategic Sourcing: a disciplined, systematic process for reducing the total cost of externally purchased materials, products and services while maintaining or improving levels of quality, service and technology thereby providing enhanced client value.
You are going to be hearing a lot about “strategic sourcing” in the next few months.
It’s being ‘touted’ as the next ‘big thing’ in today’s increasingly connected world. Some pundits says it’s the ‘silver bullet’ which will finally address business’s age-old demand for a means to reduce the time, effort and costs associated with requesting, approving and ultimately, purchasing supplies.
And it’s not just vendors with ‘strategic sourcing’ products to sell who are saying these things. In a report published in March 2001, one of the most respected global research companies, the Aberdeen Group, identified strategic sourcing as “the single largest opportunity to reduce costs, streamline processes and enhance overall responsiveness to changing market dynamic”.
Then reports started emerging from mid-sized and large companies in North America, Europe and Asia about how strategic sourcing had resulted in reductions of between 10% and 30% in their non-interest expenses.
All this has created a flurry in the e-procurement market. Many e-procurement software vendors see the good press being achieved by strategic sourcing as an endorsement of their technologies.
But real strategic sourcing – the type that Aberdeen was referring to - is not vanilla e-procurement by another name.
The e-procurement tools developed by e-procurement software vendors focus predominantly on issues such as reducing paper-processing requirements. While this can lower overheads, it doesn’t change an organisation’s fundamental procurement strategies.
This does not imply that e-procurement tools are useless. On the contrary, they’re one component of a successful sourcing strategy. There are two other components which have to be considered as well: knowledge and expertise; and supply chain.
While technology is the basis of e-procurement, it cannot displace the human dimensions - knowledge and expertise - in the 21st century procurement environment.
That’s because technology is great for automating processes that people do badly it’s less effective at automating what people do well - negotiate, build relationships, develop trust.
Finally, there’s the issue of supply chain, which is focused on using all resources – human and technical - to reduce cost and manage resources.
Collaboration plays an enormous role in ensuring a successful supply chain. Indeed, in many respects, true collaboration is synonymous with strategic sourcing. And while a connected business environment enables the transfer of information required for collaboration, collaboration itself is impossible without human intervention and skills.
Strategic sourcing therefore is a complex process. There are no silver bullets or quick fixes to getting it right – but getting it right promises significant rewards.
Miraculum is proud to welcome Acumen Technologies to the community.
"Dimension Data have opted for Miraculum since the system provides the benefits of tighter controls and cost management for us. The procurement system delivers detailed management reporting and helps streamline our procurement process for non-stock items. It identifies levels and areas of spend to enable us to micro manage our costs. Nicholas Clowes
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