Strategic Sourcing for Procurement and Fleet Management - 7 Step Process
Strategic sourcing is able to happen as a result of the planning process and can be extremely effective when procuring items within your desired budget.
The strategic sourcing process is usually a full 7 step process which is seen as an essential layer of effective planning, particularly for a regularly changing price market such as fuel.
Step 1. Understand your internal requirements
The first step within strategic sourcing includes understanding your organisation's current needs and strategy and then comparing this to how your procurement process is currently operating. Be sure to consider areas within your current budget where you believe costs can be reduced. This stage is great for improving your procurement departments efficiency but also allows for reflection on areas within your budget where you can reduce or cut costs completely.
Step 2. Analyse the supplier market
In the strategic sourcing plan, ensure you obtain the best value for money in various areas such as goods, services, raw materials, drivers, transport, and fuel costs. Analysing the supplier market helps achieve an effective budget and maximise procurement efficiency. To streamline costs, fuel cards are a recommended solution for fleets, reducing expenses, saving time, and aligning with your budget.
Step 3. Gather potential supplier details
After supplier analysis, create a portfolio of viable suppliers to mitigate supply chain risks. Gather information on more suppliers than needed to address potential issues. If the chosen supplier fails, revisit the portfolio to evaluate alternative options. Note important details in the portfolio, such as market competitiveness, supplier reputation, business performance, turnaround time, and references.
Step 4. Create a strategic sourcing strategy
Now you can decide on the type of sourcing or outsourcing strategy that will work best for your organisation. When doing so, consider the aims and objectives of your organisation and which sourcing strategy has a past history of being successful within your market. From developing the sourcing strategy, you will get the full picture of the specifications of the goods and services, a breakdown of all involved costs between you and the supplier, as well as the expected delivery time.
Step 5. Negotiation with suppliers
With the relevant information in hand, compare suppliers based on your organization's requirements. Engage the procurement department in open discussions to deliberate the final shortlist, considering all opinions on supplier opportunities and concerns. Carefully consider available options within your budget. After negotiations, select the final supplier and seek approval from relevant departments. Strategic sourcing builds a trustworthy relationship, allowing minor outsourcing tasks like inventory management, saving time and enhancing your strategic sourcing strategy.
Step 6. Implement the strategic sourcing plan
Having informed the successful supplier or suppliers that they have gained a contract, it's time to implement the strategic sourcing plan. You're now turning the strategy previously developed in step 4 into actions. This step involves starting the process of changing from the current supplier to the newly selected supplier, transferring information over and ensuring that there is an ongoing and transparent communication between the procurement department and the chosen supplier.
Step 7. Measure the supplier's performance
Measure supplier performance once the supply chain is established, focusing on key performance indicators and alignment with requirements. Communicate with other departments to gather feedback on the supplier. Maintain open communication between the procurement team and the supplier to address areas for improvement. Treat strategic sourcing as a cycle, repeating the process to assess changes in the supplier market and find better, cost-effective options. Time investment in the process mitigates risks and benefits long-term business success.
