Unless you’re a supply chain professional, the word “procurement” means nothing more than buying something. Could be buying a watch or a nice bottle of wine. “Where will we procure our dinner from this evening?” But, the supply chain discipline presents an entirely new meaning and understanding for procurement. And that meaning and use is shifting even faster now with the constant flurry of supply chain disruptions and the need for stronger strategic and global sourcing practices.
Global sourcing has become more the norm and is essential to the ability to consistently compete in a market that is disrupted by geopolitical whims and shifting tides of access to raw materials. Your procurement talent needs to be well versed in more than just where to get what, from a tactical sense. Problem solving using strategic sourcing seems to be developing as more of the norm across the end to end supply chain. Constantly disrupted supply chains require procurement to evolve faster than perhaps other supply chain disciplines and functions.
For time immemorial, procurement practices and the sourcing of raw materials have been propping up civilizations. From water to food to materials for organizational infrastructure, humans have always needed things. How civilizations got those things was through the practice of procurement.
Procurement, in the strict sense of the word, is the sourcing of materials, labor, and expertise for the production of value added goods.
The world’s supply chains have relied on procurement practices to ensure that folks have what they need when they need it to build or assemble the things they’re selling. These chains used to be a lot shorter than they are now. In the 18th and 19th centuries, America was trade partners with the United Kingdom and would ship cotton and other raw materials east. This little arrangement almost had France intervening in the Civil War which would have given the South quite a boost. But, most of the movement of raw materials occurred domestically. In America, the south produced the raw materials, the north procured these materials and made value-added goods in the industrial centers of the northern cities.
Fast forward to the post World War II era, the world began to shrink. Procurement diversified somewhat and exotic goods were more easily obtained from far off lands. But, America still continued to source and build things domestically.
Fast forward further still to the 1990’s, and labor became much cheaper overseas and didn’t have to be procured. Here we have the dawn of the modern global supply chain requiring global sourcing practices.
What is Global Sourcing?
According to the University of Michigan, strategic sourcing is a systematic and fact‐based approach for optimizing an organization’s supply base and improving the overall value proposition. This is a very broad definition of strategic sourcing, but it hits the main points.
Systematic and fact based approach includes the increased use of analytics for purposes of optimizing the acquisition of raw materials. This is an ongoing and fluid process that requires constant updates to cost structures and sources to accompany algorithmic approaches. Basically, if this price from this purchase changes this amount, then it’s time to buy more or find a new supplier. Things like routing, transportation and shipping also are factored into these equations.
Tactical Sourcing vs. Global Sourcing
It’s been said multiple times that top-tier supply chain candidates now emphasize the strategic over the tactical when it comes to talent. Constant disruptions and volatility require a more holistic and long term approach to procurement. The risks of a tactical and execution-only approach are outweighing the rewards. While short-term gains could appeal to the more routine and reactive models, they don’t pay off in the long run and usually end up costing more than they’re worth.
It is not a sustainable practice to not be examining your sourcing through a highly strategic lens. It’s no longer just about the bottom line and cost saving measures on the front end. Rather, ask yourselves if this source is sustainable and will it be able to withstand the myriad supply chain disruptions and chaos that have become the norm.
Strategic Sourcing Talent Qualities
Broadly, the two biggest skill sets needed are communication skills and negotiation. You can expand on those forever but a lot of it comes back to those things. You need someone who can build real partnerships and rapport with suppliers and also negotiate when necessary, either externally with suppliers or internally to get approval for a higher cost item for whatever reason.
Those in strategic sourcing need to be analytical thinkers. This is a non-negotiable skill set. The “why” and “so what” of things is absolutely essential in this role. For instance, candidates in these roles aren’t just looking strictly at a cost-per-unit analysis. They’re examining a total cost of ownership (TCO) of a much longer longitudinal cycle of data.
Your top notch strategic sourcing and procurement talent should be well versed in the following:
- Experience with cost estimation and cost benefit analysis as it relates to global sourcing in support of new product development;
- Strong quantitative skills and must have demonstrated the ability to apply analytical skills to problem solving;
- Strong analytical and strong problem-solving skills. Evaluates data to make decisions, anticipates obstacles and develops plans to resolve them, and creates actionable strategies and operational plans;
- Actively generates process improvements, champions and drives change initiatives, confronts difficult circumstances in creative ways, balances multiple and competing priorities and executes accordingly.
The emergence of global strategic sourcing as an emphasis in procurement practices is no surprise. It’s also not an uncommon practice. The difficulty is finding qualified talent that can monitor sourcing anomalies and trends in real time and be able to shift accordingly. Emphasizing these strategic qualities in your procurement talent is essential if your organization expects to compete in a global economy fraught with uncertainty. The volatility and disruptions of supply chains will remain the norm until reshoring and near shoring can generate adequate quantities of raw and produced materials. Even then, some raw materials can only be sourced from specific places. All of this taken together suggests that your focus be on finding problem solvers throughout your supply chain.
Finding cutting edge strategic sourcing talent can be difficult especially now, but there are Procurement Practice recruitment solutions that can make your search a lot easier. There are also industry specific Supply Chain Careers Job Boards which are perfect for sourcing procurement talent.