What does strategic sourcing do?
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In one of our recent posts So you want a career in supply chain management, we talked about some of the fantastic career opportunities open in the world of supply chain. One of the areas that sees a lot of focus is that of the strategic sourcing, but what does that team actually do?
The first thing to understand is that strategic sourcing is actually a methodology – and involves a team of people each undertaking a particular function within the process
Strategic sourcing is all about an approach to using information/data to leverage an organizations purchasing spend to maximize its return.
In terms of roles, let’s first take a look at the typical strategic sourcing team makeup. In most organizations the team is usually led by a strategic sourcing head – who’s key role is to lead the team. Underneath the leadership come the strategic sourcing managers (often referred to as category managers). Under this level is often a group of buyers (note that in some businesses the buyers are execution only and work independently of category managers executing their “buy bench”.) Often, but not always, there is some commercial representation, they will typically deal with establishing and formalizing the legal framework which will govern selected suppliers.
So let’s look at them in a little more detail
Head of Strategic Sourcing
This role leads the team. They will typically lead the construction of the top level sourcing strategy developing and executing a “strategic sourcing business plan”. They will work closely with various departments within the business often at the leadership level to ensure that the demand requirements are known and that there are appropriate sourcing projects established. This role is typically part of the leadership team and helps inform and act on top-level business strategy. They have top-level responsibility for supply chain performance in support of the business and are as such a typical route of escalation.
This role supports corporate governance and they will help establish appropriate metrics to help understand the department’s performance against their objectives and will hold responsibility for establishing the appropriate review cadence to help ensure that the strategy is being executed. They will usually be responsible for leading process improvement within the function.
They will typically be involved in major reviews with stakeholders within the supply chain and will typically meet with key suppliers at key business reviews.
They are also responsible for talent management within the function leading the building of the appropriate strategic sourcing team.
Strategic sourcing managers
This role typically involves liaising with various teams within the business in order to understand requirements. Through analyzing company spend information and understanding the company strategy, They develop and deliver sourcing plans which deliver against the business needs maximizing spend opportunities and seeking to construct the optimum supply chain for the business. There are usually a number of sourcing managers within a business each responsible for a specific area of spend.
The incumbent will typically have strong purchasing process skills and be able to consolidate and analyze data in support of the task. These roles often require leadership skills as the job owner will need to lead contracting activities involving multiple projects (which can include improvement projects) and stakeholders at the same time.
They will lead tenders and will be responsible for supporting the supplier selection process.
In terms of objectives, they are often tasked with delivering against cost down targets, meeting compliance obligations and managing risk. These individuals are often the front face for supplier relationship management.
Buyers
Buyer roles can come at various levels, lead buyers (often in charge of the team) strategic buyers (for those directly aligned to commodities), tactical buyers (for execution only). The buyer role can vary considerably between organisations.
While typically they will be at the execution end of the role, buyers can also get involved in elements of strategic procurement decision-making offering assistance to sourcing managers in helping to build and run tenders.
Buyers usually help maintain the MRP system and are often involved in report writing and KPI collation.
Commercial managers
The commercial manager can find themselves both inside and outside the procurement organizations. Thier role is usually one of supporting major projects and tenders acting as the subject matter experts leading commercial based activity.
Commercial managers help the strategic sourcing team in leading supplier negotiations and help to articulate the legal framework supporting the conclusion. The key skills associated with these roles are being able to work to deadlines, excellent problem-solving skills, analytical and being an excellent decision maker.
While aligned to the procurement team commerical managers often find thier direct reporting line into either Finance or a larger commercial function.