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What´S Strategic Sourcing? Essay

1592 words - 7 pages

There is predictive monitoring and predictive capabilities out there that businesses are taking advantage of to increase their competitive abilities. Case in point – recently a major commercial aircraft provider was unable to deliver an aircraft order to a customer timely because their ashtray company went out of business. A major bus company was also unable to deliver an order of buses because the company that manufactured and supplied their bumpers also went out of business. These two examples illustrate the power of information and the need to source strategically. It is not just the delivery of a component that is at stake, but the most capable allies that manage your supplies and ...view middle of the document...

It’s About Value
Strategic sourcing, i.e., supply management: the complexities that exist are not just price, but quality, delivery, fit and a supplier that forecasts and looks ahead and brings to an organizations ideas to make that enterprise’s process or service better, or their processes simpler, to help an organization to develop a new product and to help firm’s be cost competitive. Price is an important factor, but it should not be considered the most important factor by any stretch of the imagination. In some cases there should be a frank discussion about goals; it could be about the price of the product, delivery performance or even inventory. Whatever that specific goal or equation is it’s about taking that total cost down and as long as the principal enterprise and its supplier(s) are aligned and have the same goals about being the most productive in that arena then a frank discussion about price is okay. However, when cost is not the issue the principal and supplier relationship is about what reciprocal value is brought to one another and how that can be transformed into a benefit to their respective customers. Many firms are beginning to take a strategic and holistic view of sourcing as it pertains to common items or components like: rope, soap, and dope, nuts and bolts where cost is everything and the quality differential is not that big a deal then price is the main thing. Conversely, where there are complex components and services and specialty solutions there are and should be huge cost quality trade-off and firms that what to be successful have to get the right. Therefore, the clever companies are not looking to beat down suppliers for the cheapest price, but are looking for supplier capabilities and how they can be aligned with the principal’s business interest, goals, and incentives. Companies are quickly coming to the realization that very few items that can be procured are strictly limited to price as a purchase consideration. Whether it’s a material or service or a production component or non-production tool there is a price, delivery, quality and technology issue to everything. As they way of the dinosaur, so goes the days of auctioning suppliers purely upon price alone whereby the lowest bidder is rewarded with the purchase order.
Collaboration 12:33)
It’s been alluded to earlier in our discussion, what is needed is vendor or supplier alignment with principal businesses, but also alignment of purpose within an organization to permit departments to participate as a team when building requirements. If procurement were to operate in isolation, then the sense of belonging is lost. However, when operations and purchasing are brought together from the outset along with the supplier in response to an RFI or RFP then an opportunity to effect relationship building for all parties. And the byproduct is synergism for the internal functions of a company. The departments, whether marketing, manufacturing, finance, quality, and so...

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