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low to no variable costs, e.g. banking. Since all of the negotiating parties can be outsourcers or insourcers the main challenge in this collaboration is to find a stable coalition and the company with the best production function. This is difficult since the real production costs are hard to estimate and negotiators might be tempted to portray their real costs as much higher than they actually are in order to demand higher fees for insourcing. High
232:), the requirements, specifications of all services or materials, and negotiations/cost goals. The objective of the sourcing plan is to manage the timing and quality of all sourcing events in the strategic sourcing program. Many procurement professionals continue to conduct sourcing and RFX activities manually using spreadsheets; however, this creates risk for error and gaps in the sourcing process.
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Microsoft and McDonald's have created what is referred to as Vested
Outsourcing agreements to help build highly collaborative win-win business relationships. Researchers at the University of Tennessee provide guidance on how to create Vested Outsourcing agreements in their book Vested Outsourcing: Five Rules that will Transform Outsourcing.
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conditions, and offers alternatives to address the buyer’s sourcing goals. Furthermore, it allows internal stakeholders in the buying organization to impose constraints on the award or specify preferences to favor certain non-cost objectives such as limited switching, reduced supplier numbers or higher quality outcomes.
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Cooperative sourcing is a collaboration or negotiation of different companies, which have similar business processes. To save costs, the competitor with the best production function can insource the business process of the other competitors. This is especially common in IT-oriented industries due to
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The sourcing plan is the result of all planning efforts on strategic sourcing. Into this planning, all sourcing events are organized and detailed with tactical and operational information such as the sourcing team responsible for each event, when the sourcing event is supposed to begin and end based
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Sourcing
Business Models are a systems-based approach to structuring supplier relationships. A sourcing business model is a type of business model that is applied to business relationships where more than one party needs to work with another party to be successful. There are seven sourcing business
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Although both descriptions of the sourcing process are accurate to some extent, there is no standard set of steps and procedures. As strategic sourcing is put in place and practiced over time, many large, sophisticated organizations will modify the process to better meet their individual corporate
191:
While the modernized process combines the market assessment and cost analyses steps of the older model into a single "market research" step, and the supplier identification and sourcing strategy development steps into a single "go-to-market" step, in Payne and Dorn's summary "negotiation" has been
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When applied to sourcing and supply chain operations, optimization helps the sourcing professional simultaneously evaluate thousands of different procurement inputs. This evaluation can take into consideration the global market, specific current supply chain conditions, and individual supplier
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a business practice to another company may also be incorporated into a sourcing strategy for services. This strategy may involve the transfer of staff and assets to the outsource company. Due to the strategic and complex nature of outsourcing, many organizations such as
Procter & Gamble,
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cycle, from specification to receipt, payment for goods and services to sourcing production lines where the labor market would increase firms' ROI. Strategic sourcing processes aim for continuous improvement and re-evaluation of the purchasing activities of an organisation.
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needs. Since the whole process is customizable, it will tend to differ from one organization to the other. Sourcing has also used modern tools to analyze the possible outcomes. This automation makes tracking easy and the risk of errors greatly reduced.
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as central to this collaborative process, and anticipated that by 1 October 2015 each agency would identify at least three commodities which "could be purchased more effectively and efficiently through the application of strategic sourcing".
46:. Modern supply chain management professionals have placed emphasis on defining the distinct differences between strategic sourcing and procurement. Procurement operations support tactical day-to-day transactions such as issuing
247:, in turn, utilizes mathematical algorithms to rapidly solve a business problem by evaluating all possible outcomes (or many outcomes) and selecting those ones that yield the best solution.
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to suppliers, whereas strategic sourcing represents to strategic planning, supplier development, contract negotiation, supply chain infrastructure, and
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Sourcing business models are targeted for procurement professionals who seek a modern approach to achieve the best fit between buyers and suppliers.
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in the late 1980s and early to mid 1990s. This methodology has become the norm for procurement departments in large, sophisticated companies such as
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42:, which is specifically customized to meet the client's individual needs. In a production environment, it is often considered one component of
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in modern strategic sourcing plans, and its ability to deliver value by improving both pricing and contract terms when
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467:, Memorandum for Chief Acquisition Officers, Chief Financial Officers, Chief Information Officers, published by the
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Sarangapani notes that "sourcing", without its "strategic" function, was traditionally linked with the fourth step,
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and frequently lampoons many aspects of business and procurement culture and new trends in purchasing innovation.
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Cooperative sourcing: Simulation studies and empirical data on outsourcing coalitions in the banking industry.
264:, costs for searching potential cooperative sourcers, and negotiating often result in inefficient solutions.
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divided into two steps, "negotiation" and "contracting". This change is due to the heightened importance of
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Negotiation with suppliers (products, service levels, prices, geographical coverage, Payment Terms, etc.).
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Vested: How P&G, McDonald's, and
Microsoft are Redefining Winning in Business Relationships
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In the services industry, strategic sourcing refers to a service solution, sometimes called a
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is the process of developing channels of supply at the lowest total cost, not just the lowest
547:"Key Success Factors for an Effective Procurement or Purchasing Process | SIPMM Publications"
373: – Sourcing from the global market for goods and services across geopolitical boundaries
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39:
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Developing channels of supply at the lowest total cost, not just the lowest purchase price.
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Strategic sourcing from a professional standpoint is lampooned in the
American syndicated
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The key steps in a continuous strategic sourcing process were defined by
Japanese writer
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The
Purchasing Chessboard: 64 Methods to Reduce Cost and Increase Value with Suppliers.
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Payne and Dorn (2012) describe a strategic sourcing process with the following steps:
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Unpacking
Competitive Bidding Methods: The Essential ABCs of the Various RFX Methods,
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Assessment of a company's current spending (what is bought, where, at what prices?).
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is a discipline of applying advanced techniques to help make better decisions.
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The term "strategic sourcing" was popularized through work with a variety of
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Managing
Indirect Spend: Enhancing Profitability Through Strategic Sourcing
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Managing
Indirect Spend: Enhancing Profitability Through Strategic Sourcing
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analysis (how much does it cost to provide those goods or services?).
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is employed within this field for the duration of the series's run.
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more effectively and efficiently". The memorandum saw each agency's
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Development of a sourcing strategy (where to purchase, considering
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A United States federal memorandum issued in 2005 emphasised the
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Vested Outsourcing: Five Rules that will Transform Outsourcing
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models that range from the transactional to investment-based.
427:"Strategic sourcing in Africa: the case for the labor market"
350: – Auction with one buyer and many potential sellers
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Pages displaying short descriptions of redirect targets
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is currently written by the writer-illustrator team of
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Vitasek, Kate; Ledyard, Mike; Manrodt, Karl B (2012).
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Journal of Global Operations and Strategic Sourcing
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Assessment of the supply market (who offers what?).
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572:
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30:activities to embrace all activities within the
579:(1st ed.). New York: Palgrave Macmillan.
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502:Evolving Strategic Sourcing - A Paradigm Shift
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141:situations, while minimizing risk and costs).
26:. It expands upon traditional organisational
322:, in which the titular character's husband
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362: – Acquisition of goods and services
356: – Document that solicits a proposal
187:Implementation and continuous improvement
536:|2016|Vested Way|accessed 2 October 2016
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289:Performance-Based/Managed Services Model
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571:Vitasek, Kate; Manrodt, Karl B (2012).
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147:Implementation of new supply structure.
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654:Wiley-VCH, Weinheim Düsseldorf 2005,
513:Payne, Joe and Dorn, William (2012),
402:Supply Management: Strategic Sourcing
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150:Track results and restart assessment.
134:Identification of suitable suppliers.
484:(New York: Oxford University, 1994)
471:, 20 May 2005, accessed 22 July 2023
156:identification of suitable suppliers
682:John Wiley & Sons, Inc., 2012,
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636:Springer, Berlin Heidelberg 2009,
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200:against the identified suppliers.
91:acquiring commodities and services
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14:
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85:nature of strategic sourcing for
652:The Bermuda Triangle of Business
608:. New York: Palgrave Macmillan.
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469:Office of Management and Budget
465:Implementing Strategic Sourcing
174:The RFx process (also known as
678:Payne, Joe and Dorn, William:
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517:(John Wiley & Sons, Inc.)
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482:Strategic Industrial Sourcing
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7:
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504:, accessed 31 January 2021
443:10.1108/JGOSS-01-2020-0003
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301:Equity Partnership Model.
298:Shared Services Model and
103:Chief Information Officer
95:Chief Acquisition Officer
668:Gabler, Wiesbaden 2008,
632:Christian Schuh et al.:
551:publication.sipmm.edu.sg
425:Mayounga, André (2021).
400:Kerruish, Chris (2016).
379: – Business process
268:Sourcing business models
109:
480:Nishiguchi, Toshihiro,
276:The seven models are:
99:Chief Financial Officer
44:supply chain management
650:Gerd Kerkhoff et al.:
87:government departments
336:Francesco Marciuliano
236:Sourcing optimization
40:strategic partnership
354:Request for proposal
255:Cooperative sourcing
165:Data collection and
116:Toshihiro Nishiguchi
726:performance drivers
241:Operations research
194:market intelligence
64:blue chip companies
309:In popular culture
293:Vested outsourcing
286:Preferred Provider
220:on each RFX step (
20:Strategic sourcing
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768:
688:978-0-470-88688-5
674:978-3-8350-0946-2
664:Daniel Beimborn:
660:978-3-527-50123-6
642:978-3-540-88724-9
615:978-1-137-29719-8
523:978-0-470-88688-5
500:Sarangapani, S.,
411:978-981-10-1722-3
283:Approved Provider
139:demand and supply
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171:Market Research
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66:by a number of
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58:Use of the term
48:purchase orders
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118:in 1994 as:
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787:Procurement
741:Information
360:Procurement
328:Sally Forth
319:Sally Forth
315:comic strip
208:Outsourcing
184:Contracting
181:Negotiation
74:companies.
72:Fortune 500
52:outsourcing
32:procurement
776:Categories
736:Facilities
557:2022-06-06
387:References
129:Total cost
83:structured
28:purchasing
746:Inventory
451:233790315
377:Tendering
324:Ted Forth
198:leveraged
756:Sourcing
342:See also
54:models.
751:Pricing
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646:online
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447:S2CID
110:Steps
684:ISBN
670:ISBN
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638:ISBN
610:ISBN
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519:ISBN
486:ISBN
406:ISBN
334:and
101:and
81:and
439:doi
230:RFQ
226:RFP
222:RFI
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