CHINHOYI UNIVERSITY OF TECHNOLOGY

NAMES 1. Ephraim Bhaira C19139004V

2. Joshua Kambuzuma C19139116U

3. Arnold Chidiwa C19139663S

4.Elvis Goreraza C19139143E

5. Morgen Humanikwa C19138948M

6. Kudzanai Kundishora C19135973T

LEVEL : 2:2

CODE : CURMCS

PROGRAMME : BSSCM (BLOCK)

LECTURER : Mrs CHIFAMBA

DUE DATE : 17/05/20

ASSIGNMENT 1: Analyse the role of strategic sourcing as a tool for improving organisational
performance [20]
INTRODUCTION

According to Predrag: 2008, sourcing has evolved from a traditional purchasing approach which
was transactional and opportunistic in nature where organizations used to buy in response to
immediate needs, choosing freely from among all the suppliers that can supposedly meet those
needs to one that is futuristic and uses plans and strategies. Traditional sourcing was sporadic
and transactional and treated each purchase as a discrete transaction. Communication typically
entailed haggling over prices, complaining about late shipments or disputing the quality of
products. As a result, traditional sourcing method has had its celebrated failures. Regular reports
have been published about cost overruns, contract disputes and poor customer satisfaction, this
led to the growth of strategic sourcing of goods and services.

Definition of key terms

Strategic sourcing: Lysons and Farrington (2006), defines strategic sourcing as “concerned
with the top- level, longer-term decision relating to high – profit, high supply risk items and low-
profit, high supply risk bottleneck product and services”. It is also concerned with the
formulation of long-term procurement policies, supplier base, partnership sourcing, reciprocal
and intra-company trading, globalization and countertrade, the purchase of capital equipment and
ethical issues.

BODY

Strategic sourcing provides organizations with a number of benefits, especially if they

employ a procurement software system to help manage the operations. Below are some of
the most important benefits strategic sourcing can provide.

Cost
This is the primary reason organizations are drawn to the idea of strategic
sourcing. Procurement officials can negotiate lower unit prices for high-volume
purchases thus reducing the cost of goods and services. This, in turn, allows the business
to keep the price of their goods down and increase profit. Suppliers like this arrangement
as well because they can sell a significant portion of their output, making it easier to
make long-term plans and keep long-term cash flow visibility. While costs usually refer
to goods, the same can be said for services as buying core needs through a strategic
sourcing model can provide savings.
Supply stability
Strategic sourcing helps build stable supply partnerships and t his process of building
stable supply partnerships enables organizations to avoid ending up in a situation where
they need something and do not have it. For example, restaurants rely on their suppliers
for key ingredients such as meat and produce. Not having the proper goods or services on
time can leave businesses in a bind that could ultimately hurt the quality of their product
and hurt relationships with customers. Strategic sourcing ensures that future procurement
needs are laid out ahead of time, avoiding potentially dicey situations that could harm the
business’s reputation or bottom line. Good leaders recognize the importance of strategic
sourcing when it comes to supply stability.
Facilitates risk management

Strategic sourcing can helps to reduce the amount of risks companies face with their
supply chain. Close supplier relationships can help companies identify and resolve
potential problems quickly. For example, if a supplier is having cash flow problems, a
primary customer may advance some working capital to allow it to continue
operations. Strategic sourcing increases the communication between businesses and their
suppliers, ensuring that there are no surprises between the two. This type of working
relationship is beneficial to both sides. Business risks are very much present in today’s
fluctuating global economy. Henceforth, an increasing number of organizations are feeling the
need for scrutinizing their categories, expenses, and suppliers. When it comes to strategic
sourcing, marketers evaluate suppliers based on quality risks, financial risks, supply risks, and
support services. Organizations take effective measures to avoid the above-mentioned risks.
Agencies that offer procurement outsourcing services assist companies in identifying these risks.

Increased Profitability:
This is one of the prime benefits of strategic sourcing. Every organization indeed wants to attain
profits. With strategic sourcing activities, organizations can attain their desired results.
Companies get a chance to save money relating to their procurement operations. As a result,
purchasing enters directly into the bottom line while piling profits for companies.

The process forces business leaders to think about the long-term future. Strategic
sourcing allows them to make long-term plans and step away from the day-to-day
grind that can sometimes consume leadership. Strategic sourcing helps businesses prepare
for the future for different scenarios, both good and bad.
Strategic sourcing offers a lot of benefits for both large and small businesses. It is simply
a smarter way to procure. As businesses become more mature, they must recognize the
importance of strategic sourcing to greatly improve their supply chain management.
Working closely with suppliers is incredibly important for businesses, and strategic
sourcing serves as the best way to consistently do that.

Strategic supplier partnership

Strategic supplier partnership for competitive advantage is an important area which can make a
company to intensify its market share in the business environment .however, it is the most
valuable and difficult type of relationship. The partners have a broad understanding of each
other’s needs and visions and share important values. There is a high level of thrust and
mutuality, with open information sharing, gains sharing and concern for mutual wellbeing.
Because the partnership shares so much, it is adaptable to change and transcend tactical
difficulties. The strategic buyer supplier partnership philosophy creates a working environment
promoting team work, trust and quest for continuous improvement. It is customer-focused,
vision-focused and service-providing philosophy in which relationship based on a perception of
independent needs creates competitive advantage jointly (Lysons, 2000). Sourcing strategy does
not concern with only about selecting the best suppliers based on some standards but it also
about the relationships with the suppliers (Pulles, et al., 2014). Sourcing strategies is part of the
overall purchasing strategy that is related to defining the number of suppliers a firm will engage
for one specific items, provided the given the significance of the item and the structure of the
supply market, and how the suppliers are related to each other (Van Weele, 2001; Cousins, et al.,
2008). The strategic decisions made with regard to sourcing have different types of economic
consequences for the buying firm, the involved suppliers as well as other parties in the business
network (Gadde, et al., 2010; Håkansson, et al., 2009). Different types of sourcing strategies
have been developed to include single sourcing, multiple sourcing, dual sourcing, delegated
sourcing, parallel sourcing, network sourcing and triadic sourcing (Bildsten, 2015). According to
Lewicki, et al (2002), sourcing and strategic sourcing are critical steps in buying goods and
services and firms should analyze, assess, and select vendors and their goods and services based
on set specifications and requirements.

Enables better Decision Making:

Strategic sourcing facilitates the decision-making process of organizations. This is helping

organizations to reduce their costs. Every organization wants to attain greater value and
enhanced efficiency. In this age of cut-throat market competition, marketers are trying new ways
to reach out to the public. With the help of strategic sourcing companies, organizations are
streamlining their procurement operations.

CONCLUSION
If organizations engage themselves in strategic sourcing activities, there is always a scope for
improvement. Strategic sourcing involves a continuous cycle of activities. Even top-ranked
executives get an opportunity to learn new skills. In this way, the managers can improve on their
findings. This increases the value of their companies at large. Modern-day organizations consider
the sourcing of goods and services is a viable strategy to reduce their production costs. Yes, it is
true. But, the fact is the sourcing process should be implemented strategically by the marketers.
Procurement activities enable marketers to reduce the prices of their products and services.
Furthermore, this attracts a lot of potential customers. It is recommended for marketers to take
help from a procurement agency in this regard. One cannot deny the benefits of strategic
sourcing. The benefits of strategic sourcing are increased savings, enhanced reputation, risk
management, the continuous scope for improvement, and better decision making. The strategic
sourcing companies assist organizations during the formulation of procurement strategies.
REFERENCES

1. SOURCING INSTINCT: 2019 (PROCUREMENT FACTS)

2. PREDRAG K:2008 (EASY SOURCING FOR BUYERS)
3. LYSONS AND FARRINGTON:2016 ( PROCUREMENT AND SUPPLY CHAIN
MANAGEMENT)
4. VAAN WEELE:2001 (MANAGING SUPPLIER INVOLVEMENT IN A PRODUCT;
VOL 19)
5. LEWICKI, et al: 2002( NEGOTIATING AND BARGAINING)