The increased competition in the contemporary business environment is pushing business to adopt strategies that would reduce costs and hence enable them to provide their products at a competitive price to the customers. Despite the several strategies employed as part of the cost-cutting measures, strategic sourcing proves an efficient way through which businesses reduce their cost of production and hence offer products at a very competitive price. Ketchen, Crook, and Craighead (2014) define strategic sourcing as the process of making a decision when sourcing with the aim of creating value for the business organization and consequently creating a competitive advantage for the firm. As such, strategic sourcing has an economic and a competitive advantage for the firm. This following study explores the practical ways through which a firm can adopt strategic sourcing as well as the benefits of such sourcing to the organization. The paper further discusses the models of strategic sourcing as well as the challenges of such sourcing.
Steps in Strategic Sourcing
The adoption of strategic sourcing within an organization consists of several steps that an organization must take in order to incorporate strategic sourcing in its procurement processes and procedures. These steps can be classified into three broad categories. These categories include proficiency assessment, gap identification, establishing strategies to close the gaps, and implementing the strategies.
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The proficiency assessment and gap identification involves the documentation of competencies within an organization’s sourcing process. However, the process is less strategic. Regardless of whether a farm is strategic or not, it has a process through which it sources goods and services from other business. The development of strategic sourcing starts with the assessment of the existing sourcing process. The first step of proficiency assessment relates to the establishment of the required model. Under this step, it is imperative to identify the competencies of the existing sourcing model. It also visualizes the required competencies to create a strategic sourcing competency. The step involves the analysis of gaps such as the identification of proficiencies and competencies required for the development of strategic sourcing yet are missing the current sourcing processes employed by the firm. The shortcomings of the current sourcing process constitute the firms proficiency gaps. The analysis of such gaps is the starting point for the closure of such gaps and in the building of a strategic sourcing process.
Once the gaps have been identified, the next stage is the development of strategies that will help in closing out the gaps and hence building a strategic sourcing process. It is imperative to note that no single strategy is sufficient in closing out the gaps. As such, numerous approaches must be intertwined together in the development of a strategy to address the gaps identifies. The approaches must be widespread throughout the organization and must be specific to the organization and its needs. The establishment of strategies that can comprehensively address the gaps identified serves to create a roadmap for the implementation of strategic sourcing within an organization. While most organizations adopt training as the first type of strategy, this strategy is often inefficient when implemented in isolation. There is a need to couple this strategy with other strategies such as policy strategies and a review of the standard operating procedures within the procurement function.
The last step is the implementation of the identified strategies, a process characterized by four major steps. These include curriculum development, tailored training, re-engineering processes, and putting in place change enablers. Every training must be based on a relevant and effective curriculum. The process of training employees largely depends on the application of an appropriate and relevant curriculum. It is for this reason that the process of implementing the strategies begin with the development of an appropriate curriculum. The second step is the tailoring of the training process to the needs of the organization as well as the knowledge gap within the organization. This tailored training equips the employees with knowledge in a way that will be relevant for their roles throughout the sourcing process. Thirdly, it is important to re-engineer the sourcing as well as relevant processes to align them to the requirements of strategic sourcing. It involves reviewing work instructions and standard operating procedures within the organization that relate to the sourcing process ( Kocabasoglu-Hillmer, 2012) . The last involves putting in place change enablers. The change enablers include all resources, support, and proper environment required to create change within the organization that supports strategic sourcing.
Advantages of Strategic Sourcing
Adoption of strategic sourcing presents numerous advantages to the firm that adopts it. Firstly, strategic sourcing enables the organization to create efficiency both in the procurement-related processes as well as in non-procurement related processes. Strategic sourcing emphasizes the elimination of redundancy throughout the sourcing and procurement processes. As such, steps and requirements that do not add value to the process and the organization at large are eliminated. The result is that it creates a lean and efficient procurement procedure ( Poirier, Quinn, & Swink, 2009) . Consequently, the organization can create savings throughout its procurement process and hence increase its bottom line. Moreover, such savings enable the organization to offer competitive prices for its product.
Secondly, strategic sourcing enables the organization to procure products at the lowest possible prices without compromising the quality of such products. The process of strategic sourcing mainly focuses on the creation of value for the organization. Therefore, it ensures that the organization receives value for the money it spends on sourcing ( Armstrong, 2012) . Therefore, strategic sourcing ensures that the organization obtains the highest possible value at the least possible cost. This enables the organization to reduce its operating costs significantly while maintaining quality. As a result, the organization will manage to offer quality products at reduced prices thereby giving some competitive advantage to the organization over others in the industry.
Thirdly, strategic sourcing augments the supply chain process and equally creates value for the customer. The customers are often interested in getting high-quality products at the lowest possible prices. As noted, strategic sourcing focuses on getting and maximizing the highest possible qualities. When manufacturing firms obtain the highest quality raw material, it enables them to produce the highest quality products. Electronic and automobile manufacturers have products whose quality largely depends on the quality of the parts that have been sourced. Therefore, the emphasis that strategic sourcing place on quality enables the business organization to produce products that are both high quality and meets the needs of the customers ( Eltantawy, Giunipero, & Handfield, 2014) . As such, strategic sourcing creates value in the entire supply chain and for the customer.
Challenges of Strategic Sourcing
Strategic sourcing is associated with several disadvantages. First, it creates economic ecosystems that in turn creates exist barriers. Ketchen, Crook, and Craighead (2014) note that strategic sourcing creates closely intertwined firms making them operate and run their business as one. The suppliers are heavily dependent on the customer firms. Similarly, the customer firms are heavily dependent on the supplier. The resulting interdependency between firms within an economic ecosystem creates additional barriers that make it difficult for firms to exit. The result is that it creates and sustains competition within a given industry and in a given economic ecosystem.
The second challenge is that overburdens suppliers to the extent that they may fail to deliver the sourced products in time. Strategic outsourcing outlines specific requirements for sourced products. Such specifications and requirements are often too specific and require the contracted firm to consider them strictly while delivering the product or service. In a study to determine the impact of strategic sourcing, Chiang Kocabasoglu-Hillmer and Suresh (2011) found out that firms that adopt strategic outsourcing face the challenge of getting suppliers or getting the required product specifications. Consequently, such firms often face delays in delivery of such sourced products because most suppliers fail to meet the stringent specifications as well as strict timelines required by strategic outsourcing.
The third challenge arises from the fact that enhances stiff pricing wars and competition among firms in a given industry. As many firms adopt strategic sourcing, others gain the capacity to reduce their pieces. Consequently, this initiates a pricing war among firms. Each firm tries to attract more customers by reducing the prices (Khan, Pillania, & Khan, 2008) . The effect of this is that most firms reduce their prices beyond what can be sustained by the strategic sourcing approach. The firms that reduce their prices ultimately risk incurring losses. Therefore, strategic sourcing equally presents a risk of reducing prices if it is not adopted in a strategic approach within the industry.
Moreover, strategic sourcing presents a challenge in dual sourcing particularly for highly technical product sourcing. In most procurement processes, the firm outlines two alternative firms that can provide a given product. The idea behind this dual sourcing strategy is to ensure that the firm can get the product in the event one of the suppliers fail. However, technical products present a challenge when getting alternative suppliers because strategic sourcing outlines specific requirements of products that suppliers find it hard to meet. Therefore, strategic sourcing offers a challenge for dual sourcing, particularly for technical products and components. Chen and Guo (2014) observed dual sourcing is indeed a challenged when adapting strategic sourcing given the stringent requirements outlined in the strategic sourcing process. They found that such stringent requirements disqualify the majority of the other firms during the tendering process.
Conclusion
In summary, strategic sourcing can be defined as the process through which a firm makes decisions about sourcing and overall procurement based on the evaluation of value added to the supply chain process. There are three main steps involved in adopting strategic sourcing. These include Proficiency assessment and gap identification, establishing strategies to close the gaps, and implementing the strategies. Proficiency assessment and gap identification involves an evaluation of the already existing procurement and sourcing processes with the view of identifying gaps and deviations from the strategic sourcing process. Establishing strategies involves identifying strategies that will help close out the gaps and that are in line with the needs of the organization. Lastly, implementing the strategies involves developing training curriculum, tailoring training to the needs of the organizations, re-engineering processes and providing change enablers. The major advantages of strategic sourcing are that it enables the organization to obtain a value for the money spent on the sourced products. Moreover, it creates value for customers by reducing prices while enhancing the quality of the product. The major challenges include the creation of economic ecosystems that creates barriers as well as challenges of dual sourcing.
References
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Chen, J., & Guo, Z. (2014). Strategic Sourcing in the Presence of Uncertain Supply and Retail Competition. Production and Operations Management , 23 (10), 1748–1760. https://doi.org/10.1111/poms.12078
Poirier, C., Quinn, F., & Swink, M. (2009). Diagnosing greatness: ten traits of the best supply chains. Retrieved from http://ebookcentral.proquest.com
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Kocabasoglu-Hillmer, C. (2012). An empirical investigation of the impact of strategic sourcing and flexibility on a firm’s supply chain agility. International Journal of Operations & Production Management , 32 (1), 49–78. https://doi.org/10.1108/01443571211195736
