How to Create a Sourcing Strategy

Posted 09/05/2014

Sourcing strategies are often lauded by Procurement Directors as examples of how strategic sourcing can really add significant value to the business. They show a more professional business-like approach to managing key areas of spend within an organisation. This is true. However, when you ask those same Procurement Directors to show you examples of these marvellous sourcing strategies the evidence is less convincing – both in quantity and quality. 

What should a good sourcing strategy convey?

●     Compelling business case for change

●     Broad business based review of how to manage strategic segments of spend more effectively

●     Value improvement opportunities as well as cost down opportunities identified

●     Fully integrated with cross-functional stakeholder needs

●     Concise summary outlining the key recommendations

●     Financial benefits detailed with a clear implementation plan 

Key enablers for creating a good sourcing strategy


Contents of a good sourcing strategy

1.    Executive summary – short summary of recommendations (1-3 pages)

2.    Project charter – purpose, objectives, background, scope, team governance & project milestones

3.    Category profile – spend map, suppliers used, volumes, specifications, price history, current and forecast data

4.    Business requirements – internal customer requirements for the products or services

5.    Supply market analysis – PEST, Porter’s Five Forces, SWOT, supply chain

6.    Supplier analysis – review of current supplier performance

7.    Cost analysis – cost models, price analysis

8.    Opportunity assessment – value lever analysis, options generation and evaluation, risk assessment

9.    Sourcing approach – recommended sourcing solution

10.  Implementation plan – proposed list of actions to implement the strategy

Do you agree?  Let us know in the comments below.

Tagged by topic: Category Management

  by Simon Brown

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