Sourcing strategy

How to develop your sourcing strategy

A sourcing strategy captures any decisions made, which will then help inform and direct any sourcing activity. To help develop your sourcing strategy, it’s important to know your market position and align it with your organisational goals. For example, does your organisation want to be a cost leader? Or are you looking to add some differentiation into the market? Identifying your market position will help you spot any areas to enhance value in your supply chain to meet market demands. One way to help develop your sourcing strategy is to use the Porters value chain.

Porters value chain

A value chain is a set of activities that an organisation carries out to add value. It helps organisations understand and examine all activities and how they’re all connected. The value is split into two activities, primary and support activities.

• Primary activities: These relate directly to the creation, sale and maintenance and support of a product of service. They include inbound logistics, operations, outbound logistics, marketing and sales and service.
• Support activities: These activities support the primary activities and play a key role. Support activities can include procurement, human resources, technological development, and infrastructure.

Using the porters value chain for your sourcing strategy

The porters value chain can be useful in supporting your sourcing strategy. To help and identify your organisations value chain, here a few steps to consider.

• Identify the primary activities: For every primary activity, go further and identify which sub activities create value. These could be direct activities that create value themselves such as sales, indirect activities such as managing sales or quality control to ensure the products are free from defects.
• Identify sub activities: For the support activities such as HR, Procurement and Technology, determine the sub activities that create value. Such as how does HR contribute to the value of logistics?
• Identify links: Find the connections between all the value activities.
• Look for opportunities: Review each activity and links and think of ways to change or enhance it to give value to your customers.

What are the different sourcing strategies?

There are many different types of sourcing strategies, but it’s important to choose one that works for your organisation. Here are a few types of sourcing strategies below, which will help you develop a winning sourcing strategy.

• STEEPLED: STEEPLED analysis is a strategic planning methodology that can be used across all business functions to discover, evaluate, organise, and track external risk.
• SWOT: SWOT analysis is identifying the strengths, weaknesses, opportunities, and threats. It involves stating your organisation's objective or project and identifying the external and internal factors that will either support the strategy or if it is unachievable.
• Kraljic Matrix: The Kraljic matrix is a tool used to determine the risk of supply of materials from suppliers that feed into the supply chain. This tool helps procurement professionals determine who they should form a close partnership with, and which suppliers are more effective to build a more distant arm’s length relationship with