The Importance of Strategic Sourcing

Abstract

One of the major constraints that adversely affect the procurement process is the potential tendency for managers to forge long-term personal relationships with vendors. This may cause them to overlook opportunities for improved reliability, lower cost, and enhanced customer service elsewhere. The strategic sourcing approach provides procurement managers with a proven framework that can help continuously improve an organization's purchasing activities and add value along the entire supply chain continuum. The purpose of this paper is to provide a systematic review of the relevant literature to develop a working definition of strategic sourcing and a general description of its importance for organizations of all sizes and types, but especially multinational corporations with global supply chains in particular. The paper also provides a comprehensive analysis of the recently completed 3-year California's Strategic Sourcing Initiative to identify lessons learned and best practices that have widespread applicability today. Finally, a summary of the research and key findings concerning the importance of strategic sourcing and how it can help companies achieve and sustain a competitive advantage are presented in the conclusion.

Consumers are increasingly searching for the best deals that are available in the market, especially when it comes to high-ticket items like houses, cars, and boards. This implies that searching for the best deals is important in todays increasingly competitive market. Similarly, the same sourcing rationale applies to organizations of all sizes and types as they seek to develop and sustain a competitive advantage in an increasingly globalized marketplace. However, sourcing is an increasingly complex process for many organizations because of the intense competition in todays marketplace. There are various approaches that have been developed to help organizations in sourcing including strategic sourcing. This paper reviews relevant literature on strategic sourcing and its importance. The discussion will include an analysis of a completed strategic sourcing initiative and an analysis of the implications of the findings for real-world practice. Additionally, the paper summarizes the research and significant findings on strategic sourcing and provides an analysis of directions for future research based on these findings.

Background

Sourcing is an increasingly complex process for many organizations because of the intense competition in an increasingly globalized marketplace. Similar to any consumer, companies are looking for the best available deals in the market in attempt to develop and sustain a competitive advantage over their rivals. The need for sustained competitive advantage has contributed to the establishment of different approaches for sourcing. Sourcing is viewed as a strategically peripheral, corporate function that is linked to procurement...

One of the approaches to sourcing that is considered effective toward developing and sustaining competitive advantage is strategic sourcing. Strategic sourcing has emerged as a critical corporate function because of the impact of globalization and rapid technological innovation on competition in the marketplace. Strategic sourcing represents one of the latest innovations in supply chain management though it remains a critical challenge for many organizations (Talluri & Narasimhan, 2009). Despite being an innovation in supply chain management, many organizations do not understand what strategic sourcing is and its importance. The lack of understanding has made strategic sourcing a critical challenge for organizations as they attempt to create and sustain competitive advantages in the market.

Therefore, it is important to define strategic sourcing and analyze its importance as a corporate function and innovative supply chain management approach. Such understanding can be developed by examining a completed strategic sourcing initiative and its lesson and importance for real-world practice. To achieve this, a review of Californias Strategic Sourcing Initiative (CSSI) will be carried out. CSSI was completed in 2010 and represents one...

…market in attempt to develop and sustain a competitive advantage. Strategic sourcing is viewed as a process that can enable organizations to find the best goods and services for the best value. While there are no universally accepted definitions, strategic sourcing is essentially a process that enables organizations to find the best goods and services for the best value through creating long-term supplier partnerships. It is important since it promotes an increased level of cost savings, helps to align procurement with business objectives, optimizes ideal suppliers, and long-term relationships with suppliers. Californias Strategic Sourcing Initiative is an example of successful integration of strategic sourcing with significant implications for professional practice. Based on insights from this initiative and literature review, organizations considering implementing strategic sourcing should make significant investments in IT hardware products, design the integration as a project, and conduct the implementation gradually.

Future Research

Strategic sourcing can help organizations to streamline and innovative procurement processes in relation to finding the best goods and services for the best value. This research provides significant findings concerning the significance of strategic sourcing and how it can be beneficial to companies to develop and sustain competitive advantage. However, future research should examine whether there is a one-size-fits-all approach to the implementation of strategic sourcing. This is critical because of the diverse processes adopted by companies for their supply chain management. Examining this issue would help determine whether companies can still benefit from strategic sourcing regardless of the approach used to integrate it into the supply chain. Secondly, future research should examine changes brought by strategic sourcing on value chains and supply chain management. This would provide insighs into how companies can leverage these changes to develop and sustain competitive advantages. Finally, future research should examine whether the benefits of strategic sourcing are obtained by creating long-term…