Sourcing Strategy

In today’s globally competitive business environment, purchasing is becoming a critical participant in the firm’s strategic planning function. It is a basic process common to all organizations which accounts for approximate 40-50% of the entire budget. It may be machinery, inventories, raw materials, or service. Therefore, it has a tremendous impact on the bottom line of any business. Several questions arise while taking purchasing decision like shall we
• Go for global or local?
• Opt for Single or multiple sourcing?
• Buy on the contract or on a spot basis

According to Peter Kraljic, we can categorize our product into four categories
a) Strategic items-high profit impact, high supply risk
b) Leverage items-high profit impact, low supply risk
c) Bottleneck items-low profit impact, high supply risk
d) Non-critical items-low profit impact, low supply risk

Based on the types we have to take the purchasing approach

Strategic Sourcing

Purchasing and Supplier Management

Paper activities-

a) Identify sourcing categories
b) Identify sourcing constraints
c) Total Cost Analysis
d) Standardization
e) Purchasing process review
f) Supply market study

a) Request for Information (RFI)

b) Request for Proposal (RFP)
c) Request for Quotation (RFQ)
d) Utilize vendor evaluation tools
e) Price and cost analysis
f) Total Cost of Ownership (TCO)
g) Negotiation
h) Supplier's continuous evaluation
i) Early Supplier Involvement (ESI) and Co-Design

a) Order emission
b) Accounting

Purchasing Process

Price	Delivery	Product quality	Security
The capability of using IT systems	After-sales services	Financial position	Product improvement
Production team	Lead time Flexibility	Relationship capability	Trust
Workforce qualification	Reputation	Strategy consistency

Key Criteria we use to select a supplier

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