A Procurement Sourcing Strategy is a document that fulfills a number of purposes. For example, one purpose is to succinctly summarise the rationale and evidence for how business requirements will be met and savings made. Another purpose is to act as an internal sales document that gets senior management buy-in to the strategy.
The more purposes your strategy needs to meet, the more difficult it is to decide that the strategy is complete and ready to be issued. So, here are 12 tests you can apply to see if your sourcing strategy is ready to be shared with others in your organisation.
1. Do you have a crisp, persuasive and comprehensive summary of the future sourcing strategy? If you do, then you have the “elevator pitch” (so called because it is a proposition that is short enough to tell someone the key points in the time it takes to ride several floors with a senior manager in an elevator) – that will help you “sell” your strategy to others in your organisation.
2. Does your strategy mesh with your overall department procurement strategy and your corporate strategy? If it does then you have the basis of showing others the value that your strategy will deliver.
3. Does your strategy clearly identify the business requirements it is supporting and is there clear evidence of collaborative working with others in your organisation in developing it? If it does then your strategy has a much higher probability of gaining acceptance than if you did it in isolation.
4. Is your strategy based on a sound understanding of the sourcing history for this category? This will make sure that there is a logical pathway from where you are now to where the strategy will take you in the future.
5. Does your strategy contain an analysis of prices and costs? If it does then you have the means to show how and why your strategy achieves believable savings and what cost drivers it addresses.
6. Does your strategy demonstrate a sound analysis of supply markets? If it does then it will convince others that you have factored into your strategy and developments that are taking place in the market (such as new entrants or product changes).
7. In developing your strategy have you analysed your current and potential suppliers in terms of performance and capability? If your strategy is to meet your business requirements and target savings you need to focus on the high performing and highly capable ones.
8. Does your strategy incorporate a technology map if appropriate? Your strategy should identify and exploit any changes in technology development, trends and innovation.
9. Is your strategy based on a sound understanding of supply positioning and supplier preferencing? This is needed if you are to develop the right strategy in terms of the importance of the category, its supply risk and how key suppliers view your account.
10. Does your strategy contain a vulnerability analysis? Is there evidence of an analysis of potential vulnerability, together with plans to minimise risk to acceptable levels? This is a key consideration for senior management. They need assurance that the organisation isn’t running any unnecessary risks that might destabilise it.
11. Are their clear, agreed and balanced objectives built into your sourcing strategy? These are not just procurement objectives but business and corporate objectives as well. These show how your strategy builds value and achieves buy-in from others.
12. Does your sourcing strategy clearly demonstrate the competitive advantage it will achieve for your organisation (or in the case of a public sector organisation, how it will help a transformation initiative).
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Steve Carter is an experienced procurement practitioner and published author and runs online training and coaching courses.