Do You Know the Difference Between Strategic Sourcing & Category Management? Top Ten Myths of EITHER Strategic Sourcing OR Category Management      

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The Strategic Sourcing process that we all know and love today was actually started in the early 1990’s in the auto industry.  The inefficiencies in the buying processes including lack of standardization, too many suppliers, too much inventory, etc. led to numerous changes that resulted in the way we are buying today.  Over the years, the process and our function have matured and expanded into Category Management.  While the process has not changed much over the last 30 years, our world and our supply chains certainly have.  The same companies (Toyota, GM, Ford, etc.) that led the charge in making Strategic Sourcing a strategic business process are rethinking their focus on cost at the expense of basic risk management.

Over the last few weeks there have been numerous articles in the WSJ alone focusing on the vulnerability of our supply chains.  The latest one, “Auto Makers Hit Brakes on Just-in-Time Manufacturing” goes on and on about the supply shortages resulting from COVID-19, the freak snowstorm in Texas, the traffic jam in the Suez Canal – and these are just recent events.  In years past it was hurricanes, tsunamis, oil spills, forest fires and more and tomorrow it will be something else.  We may not know what the event will be, but we do know there WILL BE a future event and we may not be any better prepared than we are today.  What really made me sad was the way the article ended with a quote from a CEO – “this is where procurement has frankly dropped the ball, . . . .  time and time again the stuff that brings us to our knees is not the expensive stuff, it’s the tiny stuff that we don’t manage closely”. 

As Sourcing / Supply Chain professionals we are quite familiar with dealing with resistance from our Stakeholders.  We, at The Mpower Group published a set of myths over twenty years ago which we still hear from our clients today.  We have fought hard to debunk these myths and gain the credibility that we have earned.  Here they are:

Myth #10:  BUs / Users have no input into the Sourcing process

Myth # 9:  No consideration is given to incumbent Suppliers, Minority Suppliers

Myth # 8:  The Sourcing process tries to dictate business strategy

Myth # 7:  Sourcing makes all of the decisions

Myth # 6:  Supplier negotiations are adversarial

Myth # 5:  Best purchasing practices at the company are not considered as part  of the Sourcing process

Myth # 4:  The Sourcing process seeks only short-term cost savings

Myth # 3:  Quality is the trade-off for better prices

Myth # 2:  Only the lowest price / cost Suppliers are selected

Myth # 1:  Real dollar savings are not achieved

While I do believe that the exact opposite is true for each one of these myths, the dissatisfaction around our lack of focus on risk (which is not listed here) is legitimate.  For those companies that have been doing Strategic Sourcing for a very long time, this is not acceptable.  How many events need to happen for us to finally “get it”?   COVID – 19 did not cause the vulnerability in our Supply Chains it merely exposed it. 

We have spent years trying to build our credibility with our Stakeholders, Executives and even our Suppliers and an opportunity to do just that it is being handed to us on a silver platter.  Wake up!!  We can use risk management as our entree into the C suite. 

Let us know what you think and join in the conversation . . . . . . .

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Anne has been leading consulting and financial management organizations for over 25 years. She has extensive expertise in Strategic Sourcing, change management, contracting & contract management (both the buy side and sell side) organizational design and supply chain management. Anne has a passion for collaborating and educating her clients while helping them to uncover hidden value in their organizations. In addition, Anne has been named by Supply & Demand Chain Executive as a “Top 100 Provider Pro to Know” every year since 2007 and a 2013 Top Female Supply Chain executive.
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