As a businessperson, one of your goals is probably to lower your overall business costs and maximize profits. Strategic sourcing is one of the ways you can lower the costs of your supplies. It involves conducting market research and analyzing data to identify the right supply chains for purposes of lowering total sourcing costs and building long-term relationships. Here are seven tips for creating an effective strategic sourcing plan.

Understand Commodities and Their Categories

Here, you should understand what categories of commodities you want, the ones being sourced, and where to find them. Considering it takes a lot to do this, spend visibility can make category analysis easier for you.

Study the Supply Market

For better understanding, analyze the cost drivers in the market as well as the costs of labor, raw materials, and transportation. With the right details, go outside the market and conduct further analysis and compare with the former. This will help you find the best supplies at the lowest prices.

Create a Sourcing Strategy

Once you identify potential suppliers, know how you will source your commodities while keeping costs and risks low. Whatever strategy you settle on, make sure it satisfies your company’s requirements.

Choose an Appropriate Sourcing Process

The Request for Proposal (RFP) and Request for Information (RFI) are examples of popularly used sourcing methods. They should contain clear details that will govern the procurement process, which include, among others, legal terms, delivery, and service requirements.

Select Potential Suppliers

The analysis you conduct should guide you in choosing the most suitable supplier in the market. When you select a supplier, don’t be afraid to further negotiate the terms of your relationship, including prices, before you sign an agreement.

Implement and Integrate

This step involves actual sourcing with adherence to the terms and conditions leveled out in the agreement. Every party should take an active part in implementing the strategy.

Monitor Results and Improve

Not every sourcing strategy will be implemented successfully or lower your sourcing expenses. This means that you should track your results and keep improving where needed. In case it’s not working for your business, don’t be afraid to try out new suppliers and change strategies. On the other hand, if it works, improve it to gain maximum benefits from it.

Conclusion

Use these tips to create an effective strategic sourcing plan. The benefits of such a plan include, among others, reducing uncertainty, enhancing business relationships, and giving access to high-quality commodities.