Returning the "Strategic" to Strategic Sourcing (Part 2)

In part one of this post, I noted that the word "strategic" is being regularly misused in the business world. An excerpt:

As it relates to supply management and procurement, "strategic" is being misused in at least two respects:

  1. Form over Substance: Simply adding a few bells and whistles to conventional purchasing, and then slapping the word strategic onto the process or the department name, is not the same thing as adopting the process as it is intended. (This point is made strongly in the book "Straight to the Bottom Line®" by Rudzki, Smock, Katzorke and Stewart)
  2. Dumbing Down the Process: Equally concerning, are the companies that at one time employed a genuine strategic sourcing process, but have "dumbed down" their process to be a nonstrategic, tactical ghost of what it used to be.

The second situation described above may in some cases be due to the temptation of quick wins described in my last posting, and in other cases due to a change of leadership and/or losing sight of the value of staying strategic.

Much to my surprise, that particular blog has been referenced in the recent blogosphere debate regarding "Is Strategic Sourcing Dead?" So let me turn my attention briefly to that particular question. It may be helpful for you to keep in mind the perspective I bring to this subject: first and foremost I'm a former CPO, having led successful procurement transformations in different industries (in other words, I'm a practitioner -- I've actually used this good stuff); second and currently, I'm an adviser to companies seeking to make the transformation journey.

When I present at conferences, I often take the opportunity to poll the audience on various fundamental questions, including whether they are using strategic sourcing in their companies. On a few occasions I've had the opportunity to ask that question at two different points in the presentation: (1) early, before strategic sourcing was defined and described, and (2) later, after a thorough description of strategic sourcing was provided.

Generally, about 40-50% of the audience will raise their hand to the first question, indicating that they believe they are using strategic sourcing today. Less than 20% of the audience raises their hands after hearing a thorough description of strategic sourcing. What does that tell you?

Another relevant anecdote comes out of a recent conversation with a senior executive of a new client of our firm. In a revealing admission, he indicated that "a few months ago we didn't even realize that such a thing as strategic sourcing existed."

These examples, and others from our firm's experience, drive me to offer the following observations:

  1. "Is Strategic Sourcing Dead?" is the wrong question.
  2. 25 years after the birth of strategic sourcing, many companies of all sizes still are not aware of "true" strategic sourcing.
  3. A surprising number of companies believe they are using strategic sourcing, but in fact are not ("form over substance" noted above).
  4. Some companies who previously used a true strategic sourcing process have since "dumbed down" their process into a tactical ghost of what it used to be.
  5. Trying to introduce and embed strategic sourcing without the supporting pillars of a transformation roadmap is likely to generate only short-lived benefits.
  6. Leading-edge companies introduce strategic sourcing as one element of a comprehensive transformation roadmap. These companies are the ones most likely to be using true strategic sourcing (and other best practices) over an extended timeframe, yielding substantial and sustainable value.

A few years ago I wrote an article for Supply Chain Management Review on the subject of "Supply Management Transformation: A Leader's Guide." You can download it here.

Robert A. Rudzki

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