Your Ultimate Guide to Strategic Sourcing

Few, if any, businesses are self-reliant enough to achieve their strategic goals without help from other organizations. That’s exactly why effective strategic sourcing and vendor management processes are critical for company wide success. A smart strategic sourcing approach provides a framework for rigor and objectivity — it’s a way for your organization to bridge the gap between your needs and your solution. 

In this ultimate guide to strategic sourcing, you will discover exactly what strategic sourcing and vendor management is, why strategic sourcing is important, learn some best practices, and find out how to build your own strategic sourcing team. You’ll walk away with expert tips to effectively implement these processes.

What is strategic sourcing?

Sourcing is a key part of the vendor management process that includes identifying, evaluating, and selecting vendors. Strategic sourcing is the foundation for building an ideal vendor relationship — and it all starts with the ideal RFP process

Vendor management, similarly, is the process of optimizing relationships with vendors and suppliers to receive better products, services, and/or support, while reducing costs. This approach and process is also known as supplier relationship management

So, what defines strategic sourcing, compared to straightforward vendor selection? Strategic sourcing offers a broad perspective on both the requirements of the organization issuing the RFP, and the supplier landscape. Strategic sourcing considers not only your organization’s needs, but the suppliers’ unique capabilities and diverse competitive motivations. 

Why is strategic sourcing important?

Strategic sourcing is important for a variety of reasons, but the hallmark is this: relationships. A vendor is exactly that — a vendor. But when your organization as a whole steers towards strategic sourcing, you are taking crucial steps in identifying a partner. 

To understand the value of strategic sourcing, think transaction vs. relationship. Strategic sourcing takes a big-picture perspective. To be successful as you serve your customers, beating your competitors and solidifying ROI, you don’t need an occasional vendor. You need a solid partner. 

Do you ever feel like vendors fail to partner with your company after promising to do so throughout the sales process? If so, your organization is not alone. In fact, it’s a common problem.

According to Jeffrey Ton, SVP of product development and strategic alliances for InterVision, your company’s approach to vendor management may be the problem.

“You probably hear the term ‘partner’ a lot when vendors approach you. The problem is that there are too many times when it doesn’t feel like a partnership after the ink is dry,” he said in an article on Forbes. “Why is that? A partnership takes two. If I want my vendors and suppliers to act as partners, then I must act like a partner.”

He went on to explain that partnering with a vendor is “like a marriage. Any good marriage counselor will tell you that it’s not a 50-50 relationship. You and your partner must give it 100 percent. It’s for better and for worse, in good times and in bad.”

There’s lots to uncover in that analogy. Remember there are going to be bumps; we are human. Yes, even businesses are made up of humans! 

A partnership between your business and the vendor should be just that: a partnership. This is where strategic sourcing becomes the ideal approach. 

Strategic sourcing vs. procurement: What’s the difference?

Procurement and strategic sourcing are related, but different endeavors. As you move forward in strategic sourcing, it’s helpful to understand where the two overlap, and what sets strategic sourcing and procurement apart.

Procurement is the full process of sourcing and implementing partners — including placing orders and engaging for services, following up throughout the process or project and then ensuring full payment. Essentially, procurement overlays the full life cycle of how your organization engages with a vendor, from the initial search through completion.

Strategic sourcing, on the other hand, is where the stage is set. Before any purchases are made, any contracts or signed or any agreements are inked, strategic sourcing must take place. Strategic sourcing is step one in smart procurement. Before you can procure materials from a supplier, services from a vendor or any other offering, you need to identify the partner who is ideal to fit your needs.

Strategic sourcing represents the start of the procurement process, but has the whole procurement life cycle in mind. Good work done in strategic sourcing has a lasting ripple effect for your organization. When strategic sourcing is done well, it makes the entire procurement process run smoothly. Strategic sourcing is an investment in your procurement process!


Making the choice
  • Launches the vendor partnership
  • Evaluates how a partner can meet long-term organizational needs
  • Involves a cross-section of professionals throughout your organization
  • Focused on finding, identifying and vetting
  • Comprehensive and long-term approach


Doing the work
  • Extends over the life cycle of the vendor relationship, from identification through final engagement
  • Focused on a specific need or tactic
  • Involves a narrower group of people
  • Focused on acquiring the materials
    or services you need
  • Action-oriented, goal-focused approach

7 steps to strategic sourcing success

So, how do you develop and nurture successful, authentic and lasting vendor partnerships? Here are practical strategic sourcing steps to get you started.

How RFP360 can help

RFP360’s end-to-end RFP management solution empowers organizations to streamline the RFP process so they can focus on selecting the right supplier and forming mutually beneficial relationships. It’s your platform for empowering strategic sourcing.

“RFP360 helps us automate and focus on core business. Now, we can categorize, search, and profile providers, which helps us understand who would be the most appropriate vendors to invite to a particular RFP,” said Mark Rieder, SVP of HR technologies and benefits administration at NFP. “We’re shortlisting faster, and we’re being a true partner to our vendors. It’s a win-win.”

Learn how RFP360 can improve strategic sourcing and vendor management at your company.

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