Within many organizations, the procurement team is on the front line in terms of saving money. Never leaving money on the table is always a priority, and the idea is that predictive sourcing can achieve savings by negotiating better deals with suppliers. If cost savings can be achieved painlessly, that takes the pressure off the rest of the organization
The past year has repeatedly proven that the best-laid plans can fall to pieces with little or no warning. Among the many issues we’ve all had to deal with have been shortages. And it’s not just consumers who have experienced the frustration of scarcities, although we all have memories of lining up for toilet paper and disinfectant wipes. Knowing how to act on market changes before they happen is difficult for all, from individuals to large organizations. Many companies have been sideswiped by shortages through their supply chain, leaving them unable to keep up to demand—and in some cases idling production lines—because components and materials aren’t available.
Strategic sourcing is an approach that goes far beyond the traditional procurement method of focusing on cost and reducing costs. As the name suggests, it’s strategic in nature. That means formalizing procurement and supply chain management, looking longer-term than the price of a single contract. Strategic sourcing means tracking relations with suppliers and optimizing an organization’s sourcing program through constant market analysis. Strategic sourcing also means being able to measure performance and continuous improvement.
Surveys of CPOs show some predictable trends in the industry. Cost savings and timely delivery consistently top their list of main priorities—as you would expect. At the board level, there are other areas of focus when it comes to procurement, including predictive sourcing and the supply chain. Again, hardly unexpected. However, something exciting is going on as well.
Sourcing professionals have found their role growing in complexity over the decades. From a focus on keeping costs as low as possible while working primarily with local suppliers, sourcing and procurement have expanded tremendously in scope. A modern organization’s procurement department practices strategic sourcing, managing a tangled global supply chain.
With a global supply chain and disruptive events like a worldwide pandemic in the mix, it’s become clear that technology itself must advance. Organizations and supply chains were put under extreme duress by COVID-19, and it illustrated that future-proofing is needed across the world’s supply chain.
The past year has been a rollercoaster. The disruption that the pandemic has brought strategic sourcing has forced organizations to pivot and readjust. Procurement has been under immense pressure to evolve past these supply chain difficulties just for survival.
It doesn’t matter whether a company manufactures cars, frozen meals, or clothing, its supply chain is critical to success. To be profitable, a company must effectively manage its supply chain. Over the years, the supply chain has evolved in many ways. The most recent development—and the one that may just have the most profound impact of all—is the rise of the intelligent digital supply chain and predictive sourcing.
