Strategic sourcing is a process that helps companies analyze how they purchase products and services to lower costs, improve profits, and improve their supply chain. Strategic sourcing recognizes that people, including innovative suppliers, are a valuable part of an organization and focuses on reducing waste or non-value-added costs.
While most organizations implement strategic sourcing initiatives for the purposes of saving money, other reasons include improving supplier performance and minimizing risk.
Companies gain a significant competitive advantage by strengthening their procurement practices and policies. Through Process Value Management (PVM), companies understand current and future requirements and develop a strategy to procure required goods and services. PVM applies analytical tools and a fact-based approach to negotiate contracts with suppliers, defines key performance indicators, and puts a process in place to monitor and measure suppliers’ performance.