Building Your Sourcing Process
During these complex economic times, sourcing processes have never been more important. This is especially prevalent as cash flow can be seriously hindered through out-of-control spending practices and a poor procurement culture. The goal of sourcing should be to optimize costs with good governance.
Defining the Sourcing Process
Your operation needs to strive for efficient sourcing processes and adequate governance to ensure spend optimization. This will be done through defining your sourcing process and utilizing a process guideline such as the following:
Understand the business needs for the sourcing event
Get budget approval from Finance
Establish the timeline with milestones and owners
Decide on sourcing criteria, criteria weight, and have cost below the line
Complete drill down defining the needed questions on each sourcing criteria
Decide on potential suppliers
Have a brief call with each of the suppliers
Load into toolset or spreadsheet: summary of need, timeline, and sourcing criteria
Send out RFQ/RFP
Review responses and determine the scores for each supplier/sourcing criteria
Tabulate the final total scores for each of the suppliers
Schedule meetings with top two suppliers
Negotiate pricing with the top two suppliers
Complete risk assessment on any areas to focus on with the final contenders
Business owners make final decision
Complete contract
Execute the PO
Purchasing a toolset is not a must, as using Google/Excel spreadsheets will suffice. The benefits of an RFX toolset would be for workflow, organization, governance, timeline management, and metrics. Here is an example of a sample spreadsheet for RFQ assessment, in which Supplier A was eliminated and the business owners are now deciding between Suppliers B & C.
Spreadsheet for RFQ assessment
Building Your Sourcing Process
Building an optimal sourcing process takes time and experience - which is why having the right people in place will be critical. Especially for organizations just starting out, it is easy to overlook areas that only can be accounted for through experience. Therefore, it may be beneficial to seek outside counsel to oversee the establishment of your souring process and ensure there aren’t any gaps.
Mike Glass runs GPC (Glass Procurement Consulting), a procurement consulting firm focused on optimizing a company's spend. Mike has worked in senior procurement management positions at NVIDIA, Google, Meta, Fitbit, and Flextronics. Mike would enjoy getting your insight on any procurement topic, feel free to contact Mike at mike@glassprocurementconsulting.com.
