By Cyndi Joiner
During the past 10 years companies of all sizes have realized substantial savings through applying the principles of third-party relationships and/or strategic sourcing. Strategic sourcing comes in all shapes and sizes, whether an organization subscribes to an incumbent strategy that provides for direct negotiations with the current provider, an aggressive sourcing strategy or a hybrid strategy. However, the principle is the same: Strategic sourcing is a methodology used to assess sourcing requirements across the enterprise while identifying opportunities, both internal and external, for total cost reductions, improved third-party relationships and to create a competitive advantage for the corporation.
There is little debate among sourcing professionals as to the fundamentals of this process. Even so, many would debate the competencies needed and the importance of the role. As cited in A.T. Kearney's Assessment of Excellence in Procurement (AEP), "In order to deliver on goals for value creation, procurement organizations must consistently employ more advanced, non-traditional techniques and talents." (Source: Assessment of Excellence in Procurement. Copyright A.T. Kearney, 2005. All rights reserved. Reprinted with permission.)
The first obstacle many internal sourcing organizations face is positioning. Although great strides have been made to elevate the sourcing executive to "C-Level" status, a small percentage of service companies have made the leap. Sourcing professionals cannot sit idle and wait for the executive floor to "get it." They must meet that misconception head on and change it.
Simon Croom, executive director, Supply Chain Management Institute at the University of San Diego (USD), describes this new professional as "political entrepreneurs." Croom, who is responsible for the overall direction and advancement of USD's supply chain management program, says, "The sourcing executive must be active. Approximately 50 percent of his or her time should be spent on marketing the sourcing role internally. A clear communication strategy and mechanisms for raising awareness are paramount."
Croom adds that the successful sourcing professional must also be multi-dimensional. Along with the sourcing-related activities, he or she must have the ability to:
- Manage project teams effectively
- Guide the development of strategies relating to decisions concerning sourcing (including "make or buy")
- Lead strategic change in suppliers and be competent in improvement methodologies
- Formulate innovative business strategies incorporating the opportunities available through supply management and building value networks
The professional Croom describes is nothing like most of the professionals who are leading sourcing-related initiatives in many of our organizations today. Companies have blinders on when it comes to the need to "upgrade" their sourcing department's value proposition and the professionals needed to execute this new proposition. These new professionals have not grown up inside the traditional purchasing shops; their backgrounds are diverse, bringing with them technical, analytical, relationship-building, and sales and marketing skills.
Does the 21st century sourcing professional have a distinct deoxyribonucleic acid? The answer is, "yes." So, where do we find them? Or, how do we develop them? According to Tariq Hassan, founder and CEO of The Buying Triangle, "The industry as a whole has developed ‘segment players or specialists,' doing excellent work in spend analytics and implementing the sourcing process." These "segment players" according to Hassan, do not possess the ability to lead organizations through the maze of this complex space. "And this is where the disconnect lies," he says.
Linda Tuck Chapman, senior vice president and chief sourcing officer for Fifth Third Corp., Cincinnati, Ohio, maintains that, "An effective sourcing professional must possess a deep understanding of business drivers and strategies, and how third-party relationships enable their success. Gone are the days of three quotes and you're done."