Strategic Sourcing Ain't Dead, Regardless of What the Naysayers Suggest

There's been a bit of chatter lately about strategic sourcing being dead. That's right: dead. Procurement Leaders Blog recently captured some of the highlights and links from the various round-the-blogosphere discussions on the subject, including those from a local Chicago firm, M Power Group. Yet I'm not at all convinced that those who suggest that sourcing is dead are saying anything new entirely. Indeed, what they're referring to -- in a bit of an outlandish attempt to call attention to the idea -- is what I believe to be earlier stages of sourcing maturity going out of vogue. But that's not to say that sourcing, as a function and process, is any more dead that sales, human resources, IT, etc.

In fact, I argue that strategic sourcing is not only thriving right now, but that the actual role is evolving to encompass more than it used to. The key word here is "encompass," in my view -- despite what some may believe, I don't think that the five, seven or nine step strategic sourcing process ever goes away. Rather, newer elements such as risk and performance management will begin to include themselves not just as separate areas, but as integral components of strategic sourcing. For example, during the RFI or initial supplier evaluation process (or during a scenario-based optimization analysis after an event), a company might opt to incorporate various risk and performance constraints into examining award decisions.

And not even for a minute do I buy the argument that strategic sourcing is "no longer strategic" because a focus on cost, even total cost, is not a "growth driver" for businesses. I can name dozens of companies (e.g., UTC, GE, Tyco, etc.) that have competed on the basis of strategic sourcing programs focused on cost to help drive bottom line results that increase share prices and enable other activities (e.g., M&A) that would not have been possible at lower share valuations. In other words, the EPS impact from sourcing alone can be a significant enabler of strategic business benefit that would otherwise go unrealized. The same is true of PE firms who focus on sourcing as a means to improve their own shareholder returns and to create more attractive exit opportunities.

It's worth exploring this topic further. As you can tell, it's gotten me a bit fired up, to say the least. Check back for more after we've all had some time to put on a sourcing flak jacket to think through our next assault on such nonsense.

Jason Busch

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