First of all, think about what you most want to achieve from the sourcing.
Is it a cost-savings or differentiation strategy for your product, or added values such as sustainability or innovativeness? If you think all of them are important, make an Excel table and write down the importance of each element with numbers.
Sourcing professionals recommend to use the Porter's value chain to identify your sourcing strategy. He divided value activities into primary activities(activities involved in the physical creation of the product), and support activities (activities supporting the primary activities).
Identify the primary activities: Identify the primary activities. and these could be direct activities that create value themselves such as sales, indirect activities such as managing sales or quality control, and inbound logistics, outbound logistics, operations, marketing, and service
Identify sub activities: For the support activities such as HR, Procurement and Technology, and infrastructure, determine the sub activities that create value. Such as how does procurement contribute to the value of sales?
Identify links: Find the connections between all the value activities.
Look for opportunities: Review each activity and links and think of ways to change or enhance it to give value to your customers.
Where does procurement stand in Porter's model?
Though procurement stands in his model within support activities category, Porter insisted that procurement is associated with primary activities and also support the entire chain. He explained that procurement could be divided into a number of value activities such as evaluating suppliers, negotiating, contract management. Porter’s employed the term Procurement rather than purchasing to define the procurement function because the usual connotation of purchasing is too narrow.
What are the different sourcing strategies?
There are many different types of sourcing strategies, but it’s important to choose one that works for your organisation. Here are a few types of sourcing strategies below, which will help you develop a winning sourcing strategy.
STEEPLED: STEEPLED analysis is a strategic planning methodology that can be used across all business functions to discover, evaluate, organise, and track external risk.
SWOT: SWOT analysis is identifying the strengths, weaknesses, opportunities, and threats. It involves stating your organisation's objective or project and identifying the external and internal factors that will either support the strategy or if it is unachievable.
Kraljic Matrix: The Kraljic matrix is used to determine the importance of the purchases or suppliers. This tool has four criteria's of non-critical items(low impact/low risk markets), leverage items(important impact/low risk markets, bottleneck items(low impact/high risk at supply), strategic items(important impact/risk markets).
At small volume of sourcing, STEEPLED analysis is not commonly used, but SWOT analysis and Karljic matrix is very useful when there are many products and suppliers to manage.
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