Strategic Sourcing Market Strategy Analysis

The core concept of the eprocurement department is its strategic sourcing, analysis of the supply market, search for potential suppliers, negotiation and implementing their needs based on our monitoring process. They are all the most important parts of purchasing and supply management. In addition, strategic sourcing of supply markets is critical as well, and below are the 5 ways to enhance the ability to analyze the supply market.

1.Indepth Research

The basis for exploring the supply market is to utilize supplier category matrix management to conduct an investigation of its market; it also includes leveraging effect, strategy consideration, contract negotiation and problem solving, etc.

2.Perception of Procurement Team

eProcurement staff has to be aware that the market prime costs and prices aren’t decided by you, but supply and demand. Cooperating with suppliers and ensuring their total participation instead of bargaining would be the primary goal.

3.Supplier Reputation

No matter what, word of mouth does reflect the real facts of supply market with certainty. Market message might not be easy to search, but finding a qualified supplier is even more difficult.

4.Periodical meeting

Regular meetings will be held to discuss market development, price analysis and supply situation in order to obtain up-to-date information so suppliers can adjust their market sourcing strategy when needed.

5.Tracking Investigation

Tracking report, analysis and research will be provided to understand each manufacturer’s operation status regarding their material costs and the prices between them.

The Key Success Factors of Strategic Sourcing

Successful strategic sourcing not only creates a positive effect, it can also help your company to reduce expenditures significantly. Successful eprocurement strategy is based on the following elements:

1.Expenditure Transparency

High expense transparency can help to save costs, but it needs decent software for analysis, and handling all kinds of expenses. Besides that, it will have to be able to evaluate the source of the supply and make reliable plans to reduce its costs. Additionally, procurement staff with professional skills and great vision is important. They will have a great vision and sensibility on solving serious spending problems.

2.Professional Skills

A solid and professional knowledge base helps to find the most important fulcrum in the supply market. Those are the material cost of each industry, industry structure and competitive, supplier’s knowledge and advantage, industry and manufacturer financial status, raising industry development, supply price prediction, product ability, technology implementation, logistic and supply chain sourcing strategy, value-added sourcing services, etc.

3.Best Practices

Strategic sourcing is the best way to make sure the cooperating parties can maintain high performance. The idea of using this strategic sourcing is to make sure product classification, selection of suppliers, purchasing method usage and the choice of tools, negotiation and agreement conduction are implemented properly.

4.e-Procurement Technology

Great eprocurement techniques can maximize the efficiency of the whole process. eprocurement has been developed for more than 5 years and entrepreneurs are allow to share their new technology. Knowing how to utilize this technology to upgrade a company’s value and spending control would be a huge advantage.

5.Contract Conducting

Agreements have to be reached rigorously and correctly and each contract’s detail and construction is reached through constant negotiation and communication. It is important to make sure the contractor acquires all the information, and input it in the right place to make it a proper one. Excellent technology or strategy without the contract would mean nothing to a company.

6.Supplier Relation Management

Ensuring the suppliers’ total involvement and support during the whole strategic sourcing is critical, because it helps decrease the conflict from the within the company and more importantly, it influences the result of strategic sourcing. Support from upper management assures coordination with the company goes smoothly. Each department is engaged to make sure every condition is performed properly so that the purchasing and financial department can cut down the cost. User has a positive effect.

The above named strategic sourcing are doable, but the most important ones are points 5 and 6. A satisfactory material cost reduction can’t be achieved without them if they are not implemented properly.

How strategic sourcing can change buyer-seller relation

eProcurement has become one of the main sources for each company’s profit, since the increased marketing promotion and the higher production ability results in the low priced suppliers who aren’t enough for the demand. Buyers and sellers are transformed from against each other to real partners.

New Roles Between Procurres and Suppliers

The relationship between procurres and suppliers is changing dramatically. Previously, suppliers always tried to promote their own products or services so that they could sell high, but now purchasers do it through auction to obtain the lowest prices. If a supplier’s competition offers lower price, that would force other sellers to lower their product prices. To create a win-win situation is to trust and cooperate. Purchasers and sellers play roles as communicators, project managers, team leaders or consultants.

Single Source of Development

More and more entrepreneurs realize that increasing productivity and cost reduction can be done by reducing the number of suppliers. Many companies choose only one supplier or control the number as part of their important purchasing decision. For example, home appliances maker Electrolux cuts down half of their suppliers to increase the quality of products, decrease production costs and shorten delivery periods. What’s happening doesn’t mean 50% of suppliers are closing down or have disappeared, it means their position in the supply chain has changed. Instead of supply to final users, their products or services go to “system providers”and through their collaboration, sellers with competitive price, quantity and technology will be the winner.

Team Decision Making

A working relationship between buyers and sellers isn’t just one on one, it’s more likely to be a cross-department work process. Every process that is involved with technical requirements, back up support, payment method, etc is all decided by the team. Team members have to have a complete understanding of current and future sales targets, and that includes material cost saving targets, productivity goals, quality objective, etc. Supplier’s choice is critical, they have to participate and be willing to take the new way of cooperation to make the sourcing strategy more effective.

Global Sourcing Exploration

Global sourcing exploration means the integration between auction, supplier evaluation, bartering, logistic solution and service system to trim product costs and quality control. Nevertheless, global sourcing exploration carries risky such as delivery deadlines, currency fluctuation, unstable product quality, etc and that’s why a global tracking system is needed to trace the price, amount, and logistic status.

High production, High profit

Repetition is wasteful; hence buyers have to optimize business between them and supplier to ensure a reduction of product costs. What Electrolux does is to stop searching for low price sellers and instead work closely with qualified suppliers. By doing so, sellers are more aggressive and the quality of product is improved.

How to choose a suitable eProcurement platform

Sourcing strategy is one of the important cycles of eProcurement. It is essential to have a suitable eProcurement platform in order to achieve strategic purchasing goals. The principles below are widely used for choosing an online platform.

Distribution Resources

Build a multi-functional team where each member is completely aware of their own role and mission. At the same time, a temporary staff is hired to assist in order to release work pressure and to improve work efficiency.

Objective and Perception

A clear view of objectives and agreement that you wish to complete; they are adjusted for quick effect, and the chances to learn new system and knowing how it works. Hence working closely with professionals is necessary for developing and modifying the system so that the process is accomplished soundly.

Executive Reinforcement

When decision making for new system is supported by someone with more authority, issues can be solved faster.

Supplier Capability Assessment

It is important to evaluate the manufacturers regarding their reputation, ability, financial status, resources and relative experiences in the market, etc.

Testing

Before signing the contract, a wide range of physical testing and understanding for system capability is required. It is an essential to discover and solve the problems before signing the agreement.

Simultaneous Sourcing Strategy

The principle for choosing a new system is to make sure focuses on current business and strategy on overall information technology development. If disregarded, unnecessary setbacks encountered.