Create Margin Impact with Strategic Sourcing

Generally speaking, the traditional strategic sourcing approach starts with identifying opportunities through spend analysis and classification. This is followed by sourcing categories that surpass certain predefined spend and volume thresholds (or both), as well as categories that are identified with potential future importance.

Then, critically, negotiated value is codified by creating contracts that are linked to transactions. In ideal situations, these contracts would result in all the negotiated savings being “realized” as spend occurs. However, strategic sourcing is not immune to common procurement challenges such as rogue contracts or spend. That’s why it’s essential to combine strategic sourcing with effective visibility and management of transactional spend is critical.

Large enterprises today have thousands of categories to source and procure. With the reality of limited resources, all companies prioritize sourcing activities. Automation of tail spend contracts, combined with routine sourcing events, address standardized low dollar-value categories. Advanced sourcing events address high-spend and critical categories.

However, this approach results in a large set of categories being ignored or sourced too infrequently, which likely leaves money on the table. These categories represent a lucrative opportunity to capture additional value. This large set of spend categories can be optimized with externally managed community sourcing events, which are professionally run events that aggregate spend from multiple organizations.

Using strategic sourcing software, community sourcing connects businesses that have common purchasing needs to work together and use the group’s combined spend volume and sourcing expertise for group events.

There are three distinct benefits of community sourcing: capture savings, reduce workloads, and optimize quality and terms.

The value of community sourcing for procurement professionals also includes making new peer connections and gaining access to expertise outside of the organization. Many sourcing veterans find collaborating via community sourcing programs leads to new insights as well as inspiration.