A Guideline to Build a Practical Sourcing Strategy

A Guideline to Build a Practical Sourcing Strategy

As organizations continue to harness the power of globalization to improve their performance, the importance of sourcing goods from vendors has become undeniable.

Meanwhile, challenges such as economic and political instability, technological disruption, and other factors have made the market a fiercely competitive environment.

As a result, it is critical for businesses to develop a practical sourcing strategy to improve their business productivity and effectiveness and gain an edge over competitors. If you’re in the same situation, you need to follow several steps:

tips to build a practical sourcing strategy

Photo by Mark Fletcher-Brown on Unsplash 

1. Define Your Needs

Define the sourcing area or item in detail. What are the current volumes, categories, and sizes of the sourced goods? Who’s the end-user, where do they live, and who else plays a role in the supply chain? Sorting, cleaning, analyzing, and validating data are all necessary to help you define what you need.

2. Identify Suppliers 

Examine the cost factors/drivers of every good or service. Identify essential raw material costs as well as other aspects like labor and transportation, and use this information to evaluate offers later. Examine the external market for prospective domestic and global suppliers and identify risks and possibilities. Find out what options current suppliers have.

3. Build Your Sourcing Strategy 

One of the essential parts of designing a sourcing strategy is identifying how and where to buy while managing risks. It’s also possible to renegotiate with your current supplier. Your strategy must be the best fit for your company’s needs and your strengths and assets. It’s better to involve all stakeholders in this process, not just experts and end-users.

Also, when developing a Request for Proposal (RFP), you need to clearly define the project requirements, determine the acceptance criteria, stipulate the terms and conditions, and any other thing you have in mind.  

4. Involve & Implement 

Make sure the supplier, end-users, and all stakeholders are involved in the strategy’s formulation and implementation. Clear, thorough communication with an emphasis on change management can help you avoid implementation issues as much as possible. 

5. Report & Follow Up

This is a crucial phase in determining whether or not a sourcing strategy will be successful. You can see where the supplier adds value to your operation by using cloud-based solutions. Automated reporting solutions provide the quick, precise feedback you need to improve supplier relationships.

Bottom Line

It’s impossible to get the best value for your money without a reliable sourcing strategy. To do that, you need to understand what you need, find proper suppliers, involve the right people, and keep track of your progress with automated solutions. We at Penny provide a wide range of solutions that can be tailored to your operational needs and budget. All you need to do is contact us right now!



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Frequently Asked Questions

Penny is a cloud-based Procure-To-Pay system. penny helps you digitize and manage your full procurement cycle from request to approval. Manage RFQs to vendors, compare quotations, send POs and even payment. penny was designed to make things easy and consolidate all of your organization’s spending needs into one intelligent system.

  • Allocate, manage and monitor budgets by expense accounts, projects, departments, location, teams..etc 
  • Streamlining procurement means requests, approvals, and POs won’t be lost in emails or offline.  
  • History and records of requests and purchases can be extracted and tracked easily via the platform. 
  • Product requests are more accurate through the catalog, and hence avoid purchasing mistakes.
  • Reports and analysis can be extracted from the platform, giving you a consolidated data center for all your procurement activities.
  • penny is cloud-based and an easy to use platform. The action-board gives your team a user-friendly and simple experience.

Yes, penny is designed to handle complex procurement operations. We make EVERYTHING simple. Via the contract management feature, you can set the terms and conditions of your contract, and the system will recognize the products and the vendors of your request and match it with specified terms of your contract. Easy.

Putting you in control of your spending is integral to our mission. penny allows you to create Expense Accounts that match your P&L, and assign budgets to them. For example, you can assign $X for your “Travel Budget” and reflect on the budget before approving a travel request. In addition, penny allows you to set budgets for cost centers like projects, departments, locations, and so much more. With penny, you can extract reports and view your spend per Expense Accounts or cost center.

Yes. If your product search finds no results, you can submit a non-standard request.

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