7 Steps of Strategic Sourcing Explained | Procurement & Supply Chain Basics Part 3

Hello friends I am Poonam and this is third video in the series of basics of procurement and Supply Chain management [Music] in this video we will explore the seven steps involved in strategic sourcing then in the next video I'll explain the distinction between category management and strategic sourcing so let's begin strategic sourcing typically involves a structured and systematic approach to identifying evaluating and selecting suppliers to achieve the best value for an organization it involves a series of steps that organizations follow to optimize their sourcing processes Institute of Supply management provides a widely recognized framework for

strategic sourcing that includes seven steps these steps are as follows the first step is to identify potential sourcing opportunities by analyzing internal requirements Market condition and supplier capabilities this involves understanding the organization's needs conducting market research and identifying categories that offer potential for cost savings supplier consolidation or process Improvement the next step in this process is conducting supplier market analysis in this step organizations assess the supplier Market by gathering information on potential suppliers their capabilities Financial stability and performance history this analysis helps identify potential sources of Supply evaluate the competitive landscape and understand market dynamics

that may impact the sourcing decisions after conducting internal assessment and Supply market analysis the next step is developing sourcing strategy based on the analysis of sourcing opportunities and supplier Market organizations develop a sourcing strategy this strategy includes determining whether to pursue single or multiple sourcing options deciding on the sourcing approach for example make or buy or Outsourcing and establishing criteria for supplier selection evaluation and Performance Management the fourth step in this process is supplier selection and evaluation organizations evaluate and select suppliers based on the predefined criteria aligned with their sourcing strategy this involves soliciting bids

or proposal from potential suppliers conducting supplier evaluations and comparing supplier capabilities in terms of pricing quality delivery and other relevant factors the selection process aims to identify suppliers that best meet the organization's requirement and deliver the desired value after supplier selection the next step is negotiation and Contracting one suitable suppliers are identified negotiations are conducted to establish mutually beneficial contracts this step involves discussion on pricing terms and conditions service levels warranties intellectual property rights and other contractual aspects effective negotiation ensures that the organization secures favorable terms while maintaining a collaborative supplier relationship after negotiation and

Contracting the sixth step in this process is Implement and manage suppliers after the contracts are finalized organizations focus on implementing and managing the selected suppliers this involves establishing performance metrics monitoring supplier performance addressing any issues or non-compliance and fostering ongoing communication and collaboration supplier management activities aim to ensure that Supply delivers according to the agreed upon terms and meet the organization's expectations [Music] the last and the seventh step in this process is continuous Improvement and review strategic sourcing is an iterative process that requires continuous Improvement and review organizations regularly assess supplier performance monitor market conditions

identify opportunities for cost savings or process enhancements and refine their sourcing strategies by continuously evaluating and enhancing their sourcing approach organizations can drive greater value and adapt to evolving business needs it is important to note that these steps may vary slightly depending on the organization's specific requirements and Industry some organizations also follow six steps of strategic sourcing but it mainly includes all the steps that we have discussed thank you for watching I'll see you in the next video where we will discuss how strategic sourcing is different from category management don't forget to subscribe for more

videos if you have any suggestions for other topics that you would like me to cover in this series please feel free to leave them in the comments section goodbye