Managing Indirect Spend: Enhancing Profitability Through Strategic Sourcing

CHAPTER ONE

An Introduction to Strategic Sourcing

MANY BOOKS HAVE ALREADY BEEN WRITTEN on the subjects of strategic sourcing and supply chain management. Each describes a sourcing process that generally includes five to seven steps, and overall the primary differences between these books are the ways those steps are defined and segmented. The process we describe in this book does include six steps, starting with the inception of the initiative (project kickoff) and concluding with final monitoring of the implemented program (continuous improvement). However, our process applies strategic sourcing techniques specifically to indirect spend categories and offers insights and strategies that have been used successfully in real-world practice. Our process is not based on theory; the techniques described have been refined based on years of experience working with many types of companies to reduce their costs for indirect goods and services. As you will discover as you progress through the book, the process itself serves primarily as a project management tool. The use of creative strategies and the ability to adapt to ever-changing conditions are the key elements that make your sourcing initiative truly strategic.

Many companies still do not apply strategic sourcing techniques to indirect spend categories. Instead, indirect spend is treated as a series of one-off purchases, or is sourced with a simple three-bid strategy with no efforts beyond reviewing the supplier price responses. ...