No business can achieve their big-picture goals alone — which is why organizations count on strategic sourcing practices to form beneficial partnerships. These partnerships between buyers and sellers of goods and services don’t happen by accident. Productive partnerships take work and planning, which is why strategic sourcing is so important. A smart approach to sourcing provides a framework for business relationships.

In this ultimate guide to strategic sourcing, you will discover the definition of strategic sourcing and why it is important, explore strategic sourcing best practices and find out how to build a strategic sourcing team. Additionally, you’ll gain insight with expert tips to effectively implement strategic sourcing processes.

What is strategic sourcing?

Strategic sourcing is a part of the practice of vendor management. The process goes beyond how to find vendors and it includes identifying, evaluating and selecting strategic suppliers. Strategic sourcing processes build the foundation for a productive vendor relationship.

So, what defines strategic sourcing and how is it different from vendor selection? Strategic sourcing differs from vendor selection because it offers a big-picture perspective. The process takes into account not only your organization’s needs, but the suppliers’ unique capabilities and diverse competitive motivations. Vendor selection may not consider these factors, but instead focus on simply filling an immediate need.

Why is strategic sourcing important?

Strategic sourcing is important for a variety of reasons, but the most notable 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 about the difference between a transaction and a relationship. A relationship requires communication and understanding that a mere transaction doesn’t. To be successful as you serve your customers — beating your competitors and solidifying ROI — you don’t need a transactional vendor. You need a dependable 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 relationships 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.”

A partnership between your business and the vendor should be just that: a partnership — cooperative, long-term and mutually beneficial.

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.

Strategic sourcing is a part of vendor management and vendor management is a core competency of procurement (or digital e-procurement). Finally, e-procurement is a part of the larger practice of supply chain management.

Vendor management and procurement
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 ensuring payment. Essentially, procurement overlays the full life cycle of how your organization engages with a vendor, from the initial search through completion.

Strategic sourcing happens at the very beginning of procurement. It is where the stage is set. Before any purchases are made, any contracts are signed signed or any agreements are inked, supplier sourcing must take place. The sourcing process identifies the supplier who is an ideal fit for your needs.

With a strategic sourcing framework, the whole procurement life cycle is improved. Selecting strategic suppliers has a lasting ripple effect for your organization. When done well, it makes the entire procurement process run smoothly. Strategic sourcing is an investment in your procurement process.

strategic sourcing vs procurement

7 steps to strategic sourcing success

So, how do you develop and nurture successful, authentic and lasting vendor partnerships? Here are practical strategic sourcing best practices 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.

Originally published September 28, 2018 – Updated December 23, 2019