Can Strategic Sourcing Help Small Business?
Strategic sourcing is a continuous, structured, collaborative and analytical process that reduces direct spend and Total Cost of Ownership (TCO) while optimizing the supply base and improving the overall business value proposition. It is a fact-based and data-driven process that analyses and develops strategies for purchasing goods and services. Strategic sourcing employs a holistic approach that addresses many factors including, but not limited to, organizational goals, market conditions and customer needs.
Contrary to popular belief, the benefits of strategic sourcing are not limited to mere price improvements or leveraged buying, as it brings in several benefits such as supply chain savings, reduced lifestyle costs, efficient demand management, specification review, improved operating efficiency and improved supply management. No wonder it has emerged as the standard practice for many large firms.
Having said the above, it is important to iterate here that strategic sourcing, as a process, has huge potential and can bestow small businesses with huge benefits. Here are some ways in which strategic sourcing can help small businesses.
Manage Supply Stability
Small businesses face an excessively volatile supply market. Strategic sourcing, by leveraging supplier consolidation, can not only streamline the procurement process and save costs, but can also help build lasting supply partnerships. When suppliers and customers work closely together, it is easy to detect and measure defects, which leads to quality improvements in the long run.
Small businesses can use strategic sourcing techniques to analyse the supply chain and to benchmark the diverse pricing and hedging strategies. It helps improve the value-to-price, i.e., achieve rate reductions while improving service. Strategic sourcing can ensure the continuity of supply without increasing the cost.
A good relationship with suppliers helps in risk management as there is potential to identify and resolve problems sooner than otherwise possible. Strategic sourcing calls for developing alternative sources to minimize business impact in the unforeseen cases of natural disasters or financial issues that could disrupt the supply chain.
Small businesses can immensely benefit from strategic sourcing, especially from factors such as cost structuring and competitiveness. As many small businesses begin to proactively manage procurement, they gradually start achieving a broad range of business objectives. It is needless to mention that the benefits of costs, quality and process efficiency for small businesses are too good to ignore. However, since there are many options available in the market, small businesses should shrewdly find a solution that fits their budget as well as has the functionality to make the most of strategic sourcing.