Companies have begun to mention their sourcing practices on their packaging to make their products more attractive to customers. This is a trend that is one of the best things to ever happen to procurement - it gives you the opportunity to be viewed as one of the most valuable contributors to your organization's success.
Let us first highlight known values of strategic sourcing.
When you achieve these values, you gain competitive edge.
How do you achieve these values?
Some consumers prefer products that support local businesses or that invoke a sense of patriotism. If you can find the best - or an equal-to-the-best - supplier in your city or country without inflating the price that your organization would have to charge, that can help your organization have a competitive advantage.
Even as you source locally, think globally!
Some consumers want to know that harm is not imposed on others in order to have access to the product or service for which they are exchanging their money. Therefore, organizations develop ethical sourcing standards to keep their supply chains free from unsafe working conditions, use of child labour, and other unsavoury practices in order to appeal to those consumers as well as to simply "do what's right."
An increasing number of consumers want to ensure that their purchases are not detrimental to the environment. In many cases, you have the option to purchase materials that support environmental sustainability through suppliers' commitment to reforestation, biological diversity conservation, use of recycled materials, and more. By choosing more environmentally-friendly options, you help your organization appeal more to these consumers.
Of course, many consumers still choose to buy one product or service instead of others for one reason - because it is the lowest priced option available. That's not to say that is how those consumers should shop, only that it is a fact that they do. An organization's ability to compete based on lowest price is constrained by the cost of the product or service. Reducing costs without giving your organization's products or services a sales-killing disadvantage remains a valued aspect of procurement and a way of keeping your organization's products and services attractive.
Suppliers have evolved to become an opportunity for creating market winning competitive advantages or allowing competition to leverage those advantages to the detriment of your company.
Suppliers are a competitive weapon in the arsenals of world class companies with the realization that strategic sourcing builds supply chains that win against the best of the best.
Total Cost of Supply (TCS)
More often than not, the only cost that is considered in making purchase awards is the price that will end up on a purchase order. This is a win-lose mind set and is not sustainable, you’ll kill your suppliers business and that of your supplier’s suppliers’.
Total cost of supply optimization refers to taking into account all the costs that a supply strategy and execution will incur and also includes costs to the supplier as well as the customer. One of the core processes of strategic sourcing is to identify all costs related to supply and develop supply strategy’s and execution processes that result in optimized TCS; customer and supplier.
A focus on win – win for you and your suppliers lowers total costs in the entire supply chain over a period of time.