In the field of procurement management, sourcing—the search for suppliers—remains something of an obscure notion. The purpose is to optimize your procurement chain, make use of resource insourcing, reduce your costs, and find the best suppliers to help you attain your objectives.
In spite of all these benefits, many Québec businesses—small, medium and large—do not understand sourcing well or do not practice it effectively.
Yet, in an increasingly volatile and competitive market, it is important for companies to develop an efficient strategy for selecting and developing suppliers. Doing so will allow you to get the right products, in the right place, at the right time, at the best price, and in the best conditions. This will put you in a better position to meet your customers’ needs. What’s more, you will gain access to new markets and new resources.
Here Dominic Boutin, J2 procurement management consultant, shares his best tips for improving your company’s sourcing strategy.
1. Know your needs
Any procurement specialist will tell you that the first step in a sourcing strategy is to have an accurate knowledge of your own needs and, hence, those of your customers. That way, you will be able to call on resources that are best suited to your business reality.
To do this, you have to ask yourself the right questions. For example, some businesses may be using suppliers who produce over-quality—quality that exceeds their real needs—which can bring unnecessary additional costs.
Also, chosen suppliers may become problematic over time, particularly in cases where the standards your customer requires were not known and not defined at the outset of your sourcing process. It is therefore very beneficial to sit down with your team to define your needs as accurately as possible.
“Everything starts with the need, regardless of the company’s area of activity, its size or its revenue. The more clearly your business’ needs are defined, the more closely the final output will match your objectives. This is reflected in the quality of the final deliverable, but also in your company’s reputation.”
— Dominic Boutin
2. Evaluate your suppliers
Evaluating and negotiating with your suppliers is important because it helps you optimize your procurement costs.
This is necessary even with long-standing partners, as Dominique Boutin explains:
“When you like a supplier, you tend to be loyal to them, regardless of the situation. But, without necessarily calling everything into question, you do need to ask yourself whether you could do better elsewhere.”
And price is far from being the only variable to take into account in sourcing your suppliers: Quality, lead times and production capacities also need to be evaluated regularly.
3. Know the steps of effective sourcing
A successful sourcing process requires a well-thought-out game plan, involving specific steps. Here is the procedure to follow:
- Identify and clarify needs, both those of the business and of its customers. These needs must take into account the constant evolution in markets, as well as new customers and new projects for the business
- Review the portfolio of current suppliers against the deliverables you have to meet
- Sound out the market looking for new potential suppliers
- Sign confidentiality agreements with new suppliers
- Issue the initial call for bids
- Compile and meticulously analyze the results of the first round of the call for bids
- Draw up a shortlist of potential suppliers
- Conduct an in-depth evaluation of selected suppliers
- Make the final selection of supplier(s)
- Nurture the business relationship with existing suppliers
Call on specialized sourcing consulting firms and procurement management firms
If you are short of internal resources to put together a good strategy for finding the best suppliers, you can call on a firm specializing in supply chain management.
The J2 team can help you find the suppliers best suited to your business.
Call on our sourcing services to optimize your costs and attain your business objectives.