Strategic Sourcing

I Nyoman Pujawan, Ph.D, CSCP

Professor of Supply Chain Engineering
Laboratory of Logistics & SCM, Industrial Engineering – ITS
 Strategic sourcing is an approach to supply
Definisi chain management that formalizes the
way information is gathered and used so
that an organization can leverage its
consolidated purchasing power to find the
best possible values in the marketplace.

https://searcherp.techtarget.com/definitio
n/strategic-sourcing
 Strategic sourcing requires analysis of what an
organization buys, from whom, at what price
and at what volume. Strategic sourcing differs
from conventional purchasing because it places
emphasis on the entire life-cycle of a product,
not just its initial purchase price.

https://searcherp.techtarget.com/definition/strategic-sourcing
 Strategic Sourcing Vs
Procurement

Procurement operations support tactical day-to-day transactions

such as issuing Purchase Orders to suppliers, whereas strategic
sourcing represents to strategic planning, supplier development,
contract negotiation, supply chain infrastructure, and
outsourcing models.

Source: Wikipedia
 Sourcing vs Purchasing

Analyze demand Analyze expense Identify needs Create requisition

and own capacities

Identify supply Channel

sources authorizations

Sourcing Purchasing
Define a supply Create purchase
strategy cycle S2C cycle P2P order

Qualify, select and Manage shipping

develop suppliers
Evaluate Process invoice and
performance and pay
relationship value Receive goods /
Manage contracts services
 • Analysis Stage. Analysis required to
understand better the commodities, markets,
internal performance, etc. This includes
Best spend analysis, market analysis, performance
analysis, etc.
Practice in
• Consolidation stage. Reduction in supply base
Strategic may be needed to enable the company to
work with a set of best suppliers.
Sourcing
• Relationship stage. Design relationships that
reflects differing supplier characteristics.
Some suppliers are managed closely with
long-term relationships, other may be more
adversarial.

• Improvement stage. Improvement stage

requires suppliers to commit to perform
better in terms of delivery time, quality, etc.
 Category Management
• Category Management is a strategic approach to procurement
where organizations segment their spend into areas which
contain similar or related products enabling focus
opportunities for consolidation and efficiency.
• A category manager specializes in the handling of goods or
services for a specific category e.g. services, logistics,
transport, security, and is responsible for planning and
sourcing the area. It is a very specialized procurement role
which requires an individual to have a background in the
category being handled.

Source: CIPS (Chartered Institute of Purchasing and Supply)

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Typical Supplier Portfolio Model
 Supplier segmentation

 Separate those suppliers that really matter from the overwhelming number of
suppliers a company usually has.
 Define how the Company should interact with suppliers based on
performance and strategic potential

Harvest Influence Integrate

Improve Sustain Invest

Mitigate Develop Bail out

Schuh, C., Strohmer, M. F., Easton, S., Hales, M. D., & Triplat, A. (2014). Supplier Relationship Management: How to maximize vendor value and opportunity.
Apress.

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Moore et al. (2007). Developing tailored supply strategies. RAND Corporation.