Straregic sourcing and e-procurement are major new areas of potential performance improvement. How have they added value ?

Essay by robby1111University, Master'sA-, May 2004

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Technology solutions are revolutionizing the way companies are interacting with their suppliers, allowing organization to realize important saving from demand and use of more efficient procurement processes. And as B2B drives the marketplace, E-procurement solutions are increasing. This increased focus on E-procurement solutions and capabilities has changed the traditional purchasing function. E-Sourcing opportunities provide competitive advantage by significantly influencing the price and quality of purchased materials and services, as well as improving supply chain responsiveness. And ultimately, as technology continues to enable increased collaborative activities among trading partners, the result will be seamless, transparent supply chain integration.

Strategic Sourcing

The aim of strategic sourcing is to find the highest value, service and lowest total cost sources and supply in order to ensure the availability of materials and services for value adding activities. The strategic sourcing must also ensure that every sourcing decision take care about value and cost, such considerations can be ensured by involving procurement earlier in the process.

Each sourcing strategy will be developed based on the unique attributes of each category in accordance with its business impact and supply market complexity:

Strategic sourcing initiatives generally begin with a determination of the total cost of ownership (TCO) of goods and services. This includes total acquisition costs combined with lifecycle costs. Total acquisition costs are composed mainly of purchase price. Other cost elements may include transportation, materials handling and storage, training (for new suppliers, products, or services), technology testing and approval, supplier qualification, and supplier retooling costs (for new or customized products). To be successful, a company must be able to quickly calculate its TCO according to the live data that alert the company when any components have changed. Then, the company can quickly weight the effects of change on any elements of its total cost and transit time...