Despite being considered as a function concerned with purchasing at the lowest cost, sourcing function holds an extremely important place. It not only concerns the price of purchasing but also the total cost ownership of a product. Strategic sourcing focuses on getting the best long-term value of products by eliminating sourcing based on unjustified preferences, opinion or complacency.
At SpendEdge, we understand that strategic sourcing is a continuous process to bring savings. And to help companies understand the process better, we have identified some of the challenges faced by supply chain executives.
Challenges for Strategic Sourcing
Total Cost of Ownership VS. Invoice Price
Taking sourcing decisions based on invoice price is an easy process. But when there are several other factors such as freight cost, inventory cost, installation cost, and maintenance cost impacting the total cost of ownership, it becomes difficult for companies to calculate. Consequently, it complicates the strategic sourcing process.
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Off-Shore Vs. Near Shore
As the competencies of the supplier vary as per geographies, sourcing becomes complex. Near-shoring can reduce transportation costs and minimize lead time, whereas off-shoring can outweigh costs. Supply chain executives need to make a balanced decision regarding strategic sourcing to optimize the supply chain. To gain the key insights to optimize your supply chain, get in touch with our experts now!
Supplier Base Rationalization
In strategic sourcing, it is highly recommended for companies to rationalize the supplier base to manage relationships effectively. They are recommended to analyze the current profile of vendors and perform supplier base rationalization. However, this doesn't mean reducing the supplier base to an alarmingly low level and inducing a high level of dependency on suppliers.
To know in detail about challenges for strategic sourcing, read the complete article here!
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SpendEdge shares your passion for driving sourcing and procurement excellence. We are the preferred procurement market intelligence partner for 120+ Fortune 500 firms and other leading companies across numerous industries. Our strength lies in delivering robust, real-time procurement market intelligence reports and solutions.
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