Daily Archives: June 14, 2007

Smock on Sourcing Strategy

Sourcing strategy is a mental chess game that leaders play before going to market. It’s about understanding what you really want to get from the supply base, analyzing the potential suppliers, and then deciding how to approach the market with the chosen suppliers. Technology can help in this effort. The key is to choose the tools wisely and use them well.
   Douglas A. Smock, Robert A. Rudzki, & Stephen C. Rogers
     Supply Chain Management Review, May, 2007

Last month, Douglas A. Smock, Robert A. Rudzki, & Stephen C. Rogers authored a great piece on Sourcing Strategy – The Brains Behind the Game over on Supply Chain Management Review that should be considered a much-read.

The author’s note that seasoned supply professionals … recognize that technology tools- and their application to a retuned supply base in search of “on-demand” value- revolve around applying electronic and Internet-based tools to the classic strategic sourcing process on various “spend pools” or categories. Important: The process, not the electronic tool (e-tool), is the key to ongoing value mining.

Strategic sourcing is an ongoing effort to accomplish three things:

  • To understand
    the analysis of markets, suppliers, internal capabilities, needs, competitors, and industries : Understanding Leads to Strategy
  • To decide
    the tactical “go-to-market” part, which is often confused with strategy-determination of which tool to use, e.g., request for proposals (RFPs), auctions, online negotiations, face-to-face interaction
  • To manage
    perhaps the toughest to accomplish in a world in which the rules are not constant and the targets and scoring systems are changing as the customer expectations of value and the competition’s actions shift

Furthermore, understanding suppliers within key supplier industries- especially suppliers that are or could be strategic to a firm-is important. Taking supplier relationships to a higher level is a seminal factor in becoming an on-demand enterprise. Face-to-face personal interaction is critical in “knowing” suppliers, but having a way to monitor a supplier’s overall corporate situation is equally vital. And, understanding why things happen with suppliers the way they do means understanding where the vital points exist in the supply chain and who has power over those pivotal points. This effort requires thinking skills.

Although it’s quite long for a magazine article, it’s well worth the read as these are just a few of the insights it offers.