PROCUREMENT & OPERATIONS

1) Sourcing Strategies
Strategic Sourcing-Defination

A method of
managing procurement processes for an organization in which
the procedures, methods, and sources are
constantly re-evaluated to optimize value to the organization.
Strategic sourcing, which is considered a key aspect of supply chain
management, involve elements such as
examination of purchasing budgets,
the landscape of the supply market,
negotiation with suppliers, and
periodic assessments of supply transactions.
The steps in a strategic sourcing process.
1. Assessment of a company's current spending (what is bought, where, at what prices?).
2. Assessment of the supply market (who offers what?).
3. Total cost analyses (how much does it cost to provide those goods or services?).
4. Identification of suitable suppliers.
5. Development of a sourcing strategy (where to purchase, considering demand and supply
situations, while minimizing risk and costs).
6. Negotiation with suppliers (products, service levels, prices, geographical coverage, Payment
Terms, etc.).
7. Implementation of new supply structure.
8. Track results and restart assessment (Continuous cycle)
A slimmed down strategic sourcing process was defined,
1. Data collection and spend analysis
2. Market Research
3. The RFx process (also known as go-to-market)
4. Negotiations

5. Contracting
6. Implementation and continuous improvement
Modernized process combines the market assessment and cost analyses steps of the older model
into a single "market research" step, and the supplier identification and sourcing strategy
development steps into a single "go-to-market" step, negotiation has split into "negotiation" and
"contracting". This is due to the heightened importance of market intelligence in modern strategic
sourcing, and its ability to deliver value by improving both pricing and contract terms when leveraged
against the identified suppliers.
Note also that, while both descriptions of the sourcing process are accurate to some extent, there is
no standard set of steps and procedures. As strategic sourcing is put in place and practiced over
time, many large, sophisticated organizations will modify the process to better meet their individual
corporate needs.

Four Main Sourcing Strategies:

Single Sourcing
Advantages / Disadvantages
Multiple Sourcing
Advantages / Disadvantages
Delegated Sourcing
Advantages / Disadvantages
Parallel Sourcing
Advantages / Disadvantages

2) Purchasing Versus Supply

Purchasing
Supply
3) Developments in Supply Chain Management
Purchasing Strategy
A purchasing strategy is the technique that is used to acquire
goods by business. This can be through credit facilities, hire
purchase or even cash so as to get discounts.
The Strategic Positioning Tool-Reck & Long

Rack and Long's strategic positioning tool can be used for

identifying the strategic level which a firm is in. Four levels are
identified.
1) Passive - Purchasing is viewed as a clerical function and
acts on requests from other departments.
2) Independent- takes a more professional approach to
purchasing including enhanced IT and communication
technologies.
3) Supportive-Purchasing is viewed as corporately essential
and provides timely information on prices and availability.
4) Integrative- Purchasing is integral to corporate strategy and
management involve in strategy development.