Sourcing is one of the most common strategic procurement activities any organisation will undertake, however, it is also the most overlooked for adding value. Strategic sourcing is the process by which procurement professionals develop supply routes providing products and services for the lowest total cost.
Effective category planning is a significant component of strategic sourcing and its importance cannot be underestimated. In the broadest terms, categories are a group of products or services purchased across a business that have shared characteristics or similar purposes. By grouping products in this way highlights natural sourcing portfolios and opportunities for cost reduction through more effective routes of supply.
Effective category management and strategic sourcing alignment delivers cost savings on several ways. These include increasing buying power, improving economies of scale and identifying re-engineering opportunities, to improve speed of mobilisation and drive cost efficiency.
This insight is invaluable for the SMEs we work with as it allows them to implement more effective category purchasing strategies, by providing a ‘business-wide’ view of individual supply streams. Put simply, we help organisations identify the key suppliers and stakeholders in each category, from utilities to material sourcing and utilise them more effectively across the entire business.
The initial process of category definition through structured analysis can be a daunting prospect which may seem costly with potential opportunities for sourcing efficiencies or cost reduction not instantly clear. For some businesses, the process of category creation and strategic sourcing can ultimately be seen as too big a task to undertake internally.
SCB Procurement Solutions works closely with clients to help remove the headache of defining category scope and identifying the key product and service groups within their procurement cycle.
Following the initial analysis and structuring, SCB Procurement Solutions can offer varying degrees of further assistance from staff training and transitioning into a fully internal category management and strategic sourcing process, assisting with periodic category health checks or end of contract product portfolio sourcing projects, through to fully sourcing support.
From initial category structure creation to ongoing optimisation, utilising a category management structure allows for greater control over how, where and when products are sourced. Effective category management ultimately reduces cost, increases process efficiencies, and reduces supply chain risk.
Creating a sourcing strategy including risk analysis, SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis etc. enables the business to understand areas of supply chain which require development and where resources will achieve the greatest results.
Exploiting potential cost savings available through the strategic and ethical sourcing of products or components from Europe, Middle East, Asia (EMEA) etc.
Analysing the supplier’s product baskets with a view to creating cost savings and process efficiencies through better product groupings and economies of scale.
Occasionally large orders, customer projects or market shifts arrive which require new or existing products to be sourced effectively to achieve the greatest gain.
This allows smaller businesses to utilise the services of a consultant to make fundamental sourcing changes with in the business on “no win no fee” basis i.e. sourcing a large portfolio of products to Asia, the supplier only pays the consultant a percentage of the first year’s potential savings.
This insight is invaluable for the SMEs we work with. it allows them to implement more effective category purchasing strategies, providing a ‘business-wide’ view of individual supply streams. Put simply, that means we help organisations identify the key suppliers and stakeholders in each category, from utilities to material sourcing, and utilise them more effectively across the entire business.
An effective category and sourcing strategy will create a more robust and flexible supply chain which can significantly reduce or operating costs and increase profits whilst reducing supply chain risk to your business.
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