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The strategic sourcing process is a cycle, so it cannot be done once and forgotten about. A cycle approach to […]
Procurement 101
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godo godo
The strategic sourcing process is a cycle, so it cannot be done once and forgotten about. A cycle approach to strategic sourcing is essential because the market conditions are constantly changing, which means that you must continually assess your sourcing procedures and supplier performance to ensure the maximum ROI (return on investment).
In this blog, we will be covering the final phase of the strategic sourcing process: Benchmarking and Supplier Evaluation. We will discuss how to evaluate the effectiveness of your sourcing process and your suppliers in order to identify and resolve problem areas as quickly as possible.
When you monitor the right strategic sourcing KPIs, you can gain new insights into your supply chain and supplier relationships, as well as increase your company's potential for growth, profitability, and insight-driven decision-making. Using the following KPIs (Key Performance Indicators), you should be able to evaluate the effectiveness of your current sourcing strategy and identify areas that need improvement.
Evaluation of vendors should be a well-structured, data-driven process based on measurable performance indicators such as delivery times, production costs, and inventory levels.
Here are a few of the KPIs you can use regardless of what industry you are in:
Production Capacity - A thorough evaluation of the supplier's abilities and limitations should be performed. It is unlikely that you will rate a supplier favorably if they are unable to scale production to your production cycle.
Quality - Despite the difficulties in quantifying quality, supplier evaluations should always include this as a key component.
Performance - It is important for your company to ask as many questions as needed to determine whether a supplier is able to meet your typical demands. Previous experiences with companies similar to yours, recent projects that are relevant to the current product or process, and possible future developments are all worthwhile subjects for discussion.
Risk - Risks are inevitable for every business, but its suppliers should actively seek to minimize them throughout the supply chain. You can develop a reliable quantitative assessment of the risks posed by a specific supplier by reviewing performance metrics, such as overall delays, average response time, and corrective actions that are needed.
Environmental Impact - The sustainability of a business is crucial from both an ethical and financial perspective. Evaluations should cover waste management strategies, waste reduction practices, material procurement procedures, energy efficiency efforts, and any procedures used to handle hazardous materials.
Once you have evaluated your suppliers and your sourcing process as a whole, it is time to restart the strategic sourcing process in order to fix any problems. Use e-procurement software with comprehensive automated reporting, communication, and data collection features to track the success of your current plan. In addition to tracking budgets, spending, and supplier performance, these digital solutions can provide you with information on whether the suppliers you select are adding value to your organization. If they aren’t, or if specific performance metrics and ROIs aren’t being met, look for suitable replacements the next time you conduct your strategic sourcing process.
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