Strategic Sourcing and E-Sourcing Defined and Explained: A Preamble

What the heck is strategic sourcing? As with most things in life (and business), it depends on whom you ask.

One cynical definition might suggest it was an initial set of activities to make purchasing become more strategic without having to more broadly embed the function within the business — or at least sound more strategic. Another cynical lens might suggest that the terming of the phrase was a ruse by consultancies to prove they could identify savings (and of course leave behind a “process” to further justify their fees).

Yet we won’t just start the New Year with our cynical cap on. Strategic sourcing really does have multiple definitions. Consider the following:

  • Wikipedia defines it as an "institutional procurement process that continuously improves and re-evaluates the purchasing activities of a company."
  • ISM defines it as "an organized and collaborative approach to leveraging targeted spend across locations with select suppliers that are best suited to create knowledge and value in the customer-supplier interface."
  • CIPS suggests strategic sourcing is a "complex commercial process requiring extensive knowledge and competence that can be defined as satisfying business needs from markets via the proactive and planned analysis of supply markets and the selection of suppliers with the objective of delivering solutions to meet pre-determined and agreed upon business needs."

Reading that last definition, we can see why the British no longer rule the world (they were too busy picking imprecise words to describe their conquests). Joking aside, regardless of the specific definition you choose, we can say with conviction that strategic sourcing starts as a process with the end goal in mind of maximizing the value of each purchase made by the company. We would argue that furthermore, strategic sourcing requires the support of a solid technology solution (or set of solutions) that encapsulates the sourcing process and allows a buyer to extract maximum value from the process.  

You might be wondering the context of this preamble. In fact, it's quite simple. in this Spend Matters Plus series we will highlight six different approaches to strategic sourcing and what is required to support each of them. In short, we will discuss the various approaches to the sourcing process and the technology approaches that underlie them.

Among those organizations that deploy strategic sourcing approaches today (and underlying technologies to support them), we most commonly see firms take the first and second approaches — but many aspire to more strategic levels.

And, at a high level, they relate according to the following diagram:

Each of these approaches has different process and supporting technology requirements. In this series, we will explore approaches 1–6 in detail, including the processes and technologies (including feature/function checklists) needed to support each level.

Ready to get started? Check out Level 1 here.

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