In the Trenches….How to Develop Strategic Alliances

In this continuing series, Jennifer Ulrich shares her experiences in the trenches of executing strategic sourcing projects, to give you practical insights into best practices.

Companies have various intentions when they consider hiring a strategic sourcing consultant such as Source One Management Services. These might range from general to specific cost reductions, process streamlining, spend analysis, to general subject matter expertise. Another potential reason for companies to enlist a strategic sourcing consultant is to align their purchasing department and develop a more strategic approach to their internal supply chain. And just how are they doing this? The following article will discuss how and why management is moving in this direction and how they are implementing this within their organizations. Some thoughts on how sourcing consultants can contribute to the efforts will also be provided.

CFO Research Services and Ariba conducted a survey of 263 finance executives and found that the following were areas of improvement for procurement professionals (as highlighted by Alex Saric, 04 May 2012, Procurement Leaders, The Executive Network):

• Managing working capital
• Improving collaboration with suppliers
• Managing risks to business performance
• Expanding into new markets or business lines

The role of purchasing within the organization has expanded beyond the basic tasks of purchase order creation and approvals to a more strategic role that involves collaboration with internal and external resources. Companies are finding that this is one way to capitalize on their current resources as opposed to expending additional funds to acquire new personnel. Essentially, companies understand that a one-time cost reduction or a short term plan is not enough. The old adage, ‘Give a man a fish and he eats for a day, teach a man to fish and he can feed himself for life,’ comes into play here. By training staff to cultivate their skills and maximize their resources, internally as well as externally, companies are able to improve upon their existing processes. By building strategic alliances, procurement teams can ensure that they are working efficiently and effectively with management to reach a common set of goals.

Purchasing teams need to be involved in every step of the process, from the sourcing of a particular category all the way through the implementation of the contract. They should also be included in the continuous improvement stage of the supplier relationship to ensure that they are realizing the most opportunity from their vendors throughout the life of the agreement(s). Strategic alliances are internal to the organization in the form of a supportive management team or solid decision makers. External alliances exist in vendors who provide that extra something above and beyond the basic product or service lines. The procurement team is at the core of building alliances that will strengthen the company’s purchasing culture.

Based on my experiences in strategic sourcing, this trend of aligning resource teams is becoming more commonplace in all industries. Strategic sourcing consultants can play a major role in helping organizations achieve their financial and valuation goals. Firms like Source One bring more than just subject matter expertise into the equation. My fellow experts and I are able to transfer our knowledge of the industry and expose organizations to better ways of managing their supplier relationships, in addition to understanding what their costs are and how they affect the bottom line. For more information on how Source One can help you and your company today check us out at, sourceoneinc.com.

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