How to Build an Effective Strategic Sourcing Process: A Step-by-Step Guide

Recently, retailers, wholesalers, and ecommercers have shifted their focus from traditional sourcing to strategic sourcing. In the supply chain uncertainty and digital transformation age, how procurement helps companies add value has become a frequent question.

This is also important for business sourcing from China. So, we write this step-by-step guide originating from frameworks like Kearney's 7-step strategic sourcing process to help you deeply understand strategic sourcing and how it reduces cost, mitigates risk, and strengthens supplier relationships. Let's dive into it!

What is Strategic Sourcing?

Strategic sourcing is a forward, cyclical procurement process that aims for continuous improvement and re-evaluation of the purchasing activities of an organisation.

Strategic sourcing is the process of developing channels of supply at the lowest total cost, not just the lowest purchase price, highlighting quality, innovation, and sustainability to reduce the total cost of ownership, mitigate supply chain risks, and forge long-term strategic supplier partnerships.

How does it Differ from Traditional Procurement?

Unlike traditional sourcing, which focuses on immediate purchases by price, strategic sourcing is a long-term procurement method through comprehensive evaluation criteria. Strategic sourcing works upstream to support the whole enterprise: analyzing spending by category, proactively getting market intelligence, and defining a framework.

So, why does strategic sourcing perform better?

• Data drives decision: Data analytics and procurement tech sharply improve spend control and the quality of products as well as services.

• Deeper Cost Visibility: Comprehensive sourcing cost analysis helps uncover hidden costs, including logistics, quality issues, and supplier risk.

• Enhanced procurement resilience: Strategic sourcing helps companies navigate supply disruptions, price volatility, and regulatory changes, creating the conditions for sustainable business growth.

• Stronger Supplier Relationships: Structured supplier network management enhances innovation and mitigates operational risk.

7 Steps to Build an Effective Strategic Sourcing Process

Now that the introduction is over, let's get to the point of the 7-Step strategic sourcing process.

Step 1: Business Needs and Sourcing Cost Analysis

A robust strategic sourcing process starts with business needs and comprehensive cost analysis, including product needs, service requirements, product costs, service fees, etc.

So, you'd better first understand the whole business sourcing item requirements and divide them into different categories, like selling products, daily necessities, and service needs. Then, analyzing the spending of each detailed category and the total, so that adjust some expenses more accurately, forming a better strategic sourcing fee structure.

Step 2: Identify Strategic Sourcing Opportunities

With spend insight in hand, you can get started identifying strategic sourcing opportunities. The Kraljic Portfolio Model is highly recommended to help find the best strategy, which involves low spend and fewer supply risks.

Based on this model, you can map a category and get a clear roadmap to where sourcing efforts will generate the greatest value.

Step 3: Research and Develop Potential Suppliers

All right, according to your strategic sourcing opportunities to map your supplier network. You can attend diversity trade fairs, such as the Canton Fair to touch real factories and products. You can visit e-commerce sites like Amazon and Alibaba to communicate with worldwide sellers online. Also, sourcing agents can offer more convenient and lower costs services. As over 20 years of strategic sourcing experience profesional company, we have own strong supplier network with reliable products.

Step 4: Assess Total Cost of Ownership and Risk

After the potential partner development, you should evaluate the total cost of ownership and the risk of suppliers to avoid unnecessary spending.

Asked yourself if you consider the full impact: tariffs, freight, storage, logistics, and service costs; IP protection and sustainability compliance; ISO security and resilience?

Step 5: Negotiation and Supplier Selection

In strategic sourcing, negotiation isn't just for the lowest price, you should communicate the key aspects in the previous step. The best preparation is developing a structured negotiation book, covering product quality assurance, all fee structures, delivery schedules, etc. Don't forget to request samples to test the real quality and sign a contract with your satisfied supplier.

Step 6: Implement Agreements and Onboard New Suppliers

Accurate execution helps build a strong partnership. For you, you should pay the fees on time and keep focusing on the supplier's production and transportation processes, asking about any problems immediately if they are wrong.

Of course, if you find it difficult to pay the fees in one time, you may want to try EJET Procurement's Credit Payment Term service. I believe you can gain greater financial leverage by delaying the payment of fees.

While implementing, you should always be prepared to onboard new suppliers. A diversified supply system will help you solve supply chain problems more flexibly. For example, when a UK wireless headset supplier is out of stock, you can transfer the sourcing to China.

Step 7: Monitor Supplier Performance and Continuous Improvement

Just like your company, strategic sourcing needs to be continuously improved. This optimization may come from the supplier network or the procurement strategy adjustment. So, you should deploy performance tracking across key metrics for long-term strategic alignment:

• Quality

• Delivery

• Responsiveness

• Compliance

• Supply chain decarbonization

……

How EJET Procurement Helps You in Strategic Sourcing?

EJET is a trusted China sourcing agent that specializes in offering all-in-one services for worldwide retailers, wholesalers, and e-commerce sellers. With our strategic sourcing solutions, you can get help in these aspects:

Needs Analysis and Suppliers Research

With 20 years of China sourcing experience, we have strong market insight to quickly pinpoint the most suitable products based on your business goals and niches, and customize strategic sourcing solutions for you.

At the same time, supplier-integrated systems are the backbone of our procurement. Through digital solutions, we can find reliable suppliers at the fastest speed.

Negotiation and Quality Inspection

EJET manages end-to-end negotiation. Our sourcing team has excellent communication and negotiation skills that can help you gain more benefits at limited costs.

EJET promises 100% quality assurance for the product we sourced. This is because we have strict multi-stage quality inspections(including pre-purchasing, during production, and pre-shipment) to ensure your perfect products without any defective.

Freight Forwarding

We coordinate Door-to-door shipping from origin to destination, including warehousing service, inventory management, customs documents, and so on. Our flexible logistics solutions can maximize optimize your strategic sourcing strategy and lower your sourcing costs.

You can visit our Freight Forwarding page for details.

Final Words

Strategic sourcing is more than a procurement skill, it's a strategic lever that combines sourcing with business outcomes. Believe you have deeply understood how to build an effective procurement and supply chain management through our 7-step strategic sourcing process.

Ready to transform your business from traditional sourcing to strategic sourcing? Contact us today to explore our tailored solutions and all-in-one services!