5 Benefits of Strategic Sourcing That Will Transform Your Procurement

It won’t surprise you to learn that strategic sourcing involves, well, taking a strategic approach to your sourcing process. But what does that actually mean, and how does it differ from regular sourcing?

Traditionally, the sourcing process prioritized getting the lowest possible prices for the goods and services your business needs—for example, buying in bulk to get discounts. But while cost reduction is a crucial part of any procurement optimization process, it’s not the only thing to consider. 

With strategic sourcing, forward-thinking procurement teams look beyond initial costs to consider the total cost of ownership (TCO) of goods or services, as well as other inputs that may impact decision-making. This enables them to maximize value and minimize risk across the entire supply chain and procurement cycle. 

By assessing potential suppliers using a range of criteria—like quality, reliability, company values, supply chain efficiency, customer satisfaction, technology adoption, sustainability and ESG, and brand reputation—procurement teams can find the overall best solution for their specific needs and goals, delivering long-term results for their business.

In other words:

• Traditional sourcing focuses on securing suppliers at the lowest cost. This may result in short-term savings, but leaves you open to risk and inefficiency down the line.
• Strategic sourcing is the process of identifying, evaluating, and selecting suppliers based on a range of criteria to reduce the overall costs associated with the goods and services you procure. This ensures long-term value as part of a sustainable procurement strategy.

Today, businesses rely on powerful eSourcing solutions (like Keelvar—that’s us!) as a crucial part of strategic sourcing. With the right tool, companies can collect, analyze, and manage all of their sourcing-related data from one central platform, empowering them to make business-critical decisions and improve efficiency. 

Want to see how Keelvar can take your strategic sourcing to the next level? Request a demo →

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Strategic sourcing has a whole host of benefits that can transform your procurement processes—and your business. Here are five of our favorites. 

1. Lower procurement costs 

Cost reduction is always going to be a major priority for procurement teams. Let’s look at three ways strategic sourcing reduces procurement costs: by prioritizing TCO, by boosting competition, and by optimizing your procurement processes to reduce operational overheads.

Shift focus from short-term costs to long-term value

It’s a procurement tale as old as time: you need an asset quickly. You get a referral for a nearby supplier with low prices, and buy it for $1,000. Six months later, that asset needs $500 worth of repairs. After three years, it breaks down completely (just out of warranty, of course), and you need to pay an additional $200 to dispose of it—leaving you back at square one trying to source a replacement. So far, that asset has cost your company $1,700, plus you still need to procure a new asset (which will take time, money, and team resources).

Now rewind. Using strategic sourcing tactics and sourcing optimization software, you identify several global suppliers. After evaluating the data and running AI-powered scenario analysis, you select a high-quality option for $1,500, and the supplier provides free repairs if needed. The asset lasts for 10 years. Everyone lives happily ever after.

Despite having a higher upfront cost, it’s easy to see that option two is ultimately the most cost effective. Not only is it cheaper in the long term, but there are fewer disruptions to your operations due to unexpected breakdowns ($$$) and less work for your procurement team ($$$).

This is strategic sourcing in action. Now imagine this scaled across every sourcing project—from everyday tactical and tail spend to the most complex strategic decisions—and you start to see the tangible impact strategic sourcing can have on your bottom line.

Run scenario analysis using Keelvar’s Sourcing Optimizer to make strategic sourcing decisions based on complex data 

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📈 Keelvar in action: How a strategic eSourcing solution helped one tech giant save $60m in cost avoidance

When one US tech company realized that slow and inefficient processes were preventing them from responding quickly to market changes—and negatively impacting their bottom line—they knew they needed a better way to manage their sourcing.

Since adopting Keelvar, they’ve been able to take a more strategic approach. By reducing manual processes, automating repetitive work, and eliminating human mistakes, they’ve freed up more time to focus on strategic priorities. Using Keelvar to implement a dynamic market sourcing strategy, they’re able to optimize their spend and go to market more frequently without needing to add more resources.

The results? $60m in cost avoidance over 12 months, a major increase from one annual sourcing event to 17, and an improved ability to handle market volatility and cost management.

“Keelvar, at the click of a button, will tell you the best-case scenario based on everything that has come through in just a few seconds.”

—US tech giant

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Increase competitiveness between suppliers for better results

Another way strategic sourcing can reduce procurement costs is by increasing competitiveness at the bidding stage. 

Using an eSourcing solution like Keelvar as part of your strategic sourcing process, you can encourage suppliers to craft personalized bids to offer you the best deal, such as creating item bundles or offering conditional discounts.

You can also run eAuctions to create a more dynamic, fast-paced bidding cycle. With eAuctions, you invite pre-qualified suppliers to bid against each other in real time to win your contract, increasing transparency, lowering costs, and speeding up negotiation timelines—without compromising on quality or strategic goals.

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Enhance procurement workflows and team efficiency to unlock operational savings

With strategic sourcing, every improvement you make has incremental, compounding effects—and that goes for your internal processes, too.

Procurement teams are often trapped in a reactive cycle of urgent requests, never-ending admin, and last-minute approvals, leaving little time for strategic, big-picture thinking.

Switching from traditional, manual sourcing to strategic sourcing—and adopting a best-in-class tool to facilitate it—streamlines workflows and improves team efficiency, winning back hours every day. (Literally: Samsung saved 85% of time when they switched from spreadsheets to Keelvar.)

By using the right combination of tools and processes as part of their strategic sourcing, procurement teams can enhance day-to-day performance, making them more efficient and effective.

• Standardization and templates reduce the need to reformat information or chase up missing details
• Centralized data removes silos and makes it easy for all stakeholders to see what’s happening, when
• Supplier communication happens within one platform, creating audit trails and streamlining relationship management
• Compliance and best practices are automatically built into repeatable workflows for effortless excellence
• Sourcing automation can handle up to 100% of the tender process for high-volume, low-value tasks, winning back time for more strategic sourcing
• AI-powered sourcing optimization helps teams process more information to make high-stakes decisions

“Keelvar makes processes that are complex, simple, so you can easily follow them, and you can easily go through the checkpoints, so you’re sure you’re not going to make a mistake. It’s like having a second pair of eyes checking everything you’re doing, but in a smart way that unlocks more value for strategic events.”

—Radu Panciuc, Contracts & Innovation Manager, Samsung

2. Improved long-term supplier relationships 

Strategic sourcing is about finding the right suppliers for your needs, not just the cheapest suppliers. 

This means that in contrast to the traditional, transaction-focused vendor-supplier relationship, strategic sourcing encourages both parties to collaborate and think about their overall objectives. 

As a result, it emphasizes the importance of building positive supplier relationships that are mutually beneficial. Over time, these long-term partnerships can lead to increased innovation and continuous improvement for both businesses, as they work together to reach shared goals.   

3. Acquisition of high-quality goods and services

As we’ve repeatedly seen, one of the most important aspects of strategic sourcing is the shift away from cost as the be-all-and-end-all when it comes to making sourcing decisions. 

Instead, strategic sourcing encourages you to connect with a global database of potential suppliers to collect and analyze large amounts of data. Then, depending on the type of spend, you can use AI-powered sourcing optimization software to make informed decisions, or leverage sourcing automation to automatically identify the best suppliers—so you always get the best possible goods and services for your business.

Use Autonomous Sourcing to automate the tender process for low-value spend, from supplier selection to contract award

4. Improved compliance 

Strategic sourcing involves implementing structured processes that improve every aspect of your sourcing cycle. This includes creating automated workflows that effortlessly capture key compliance and governance data, using templates and standardization to scale your best practices by default.

Plus, as you centralize all your data into one easy-to-use platform, you reduce the risk involved with siloed information, and make it easier to regularly review and audit your records.

5. Data-driven decision making 

Because strategic sourcing considers multiple criteria that matter to your business, it enables you to make more holistic, informed sourcing decisions. Using sourcing optimization software, you can perform complex data analysis that wouldn’t be possible by humans alone, ensuring you make the best decision even in high-stakes events.

And with all your data in one platform, you can run regular analysis to find new opportunities to improve your procurement process and easily spot risk factors before they become a problem.

“Keelvar, at the click of a button, will tell you the best-case scenario based on everything that has come through in just a few seconds.”

—US tech company

Ready to revolutionize your procurement? Here are some strategic sourcing best practices to help you get started.

Choose the right tool  

The right eSourcing solution makes strategic sourcing effortless. It streamlines your processes for day-to-day efficiency, automatically scales your best practices across the entire organization, captures all the data you need to make informed decisions, and—most importantly—helps you drive better outcomes based on what’s important to your business.

When you’re considering which strategic sourcing software is right for your business, look for one that offers:

• Cutting-edge capabilities like sourcing optimization and autonomous sourcing
• Integrations with the other core tools in your procurement tech stack
• An intuitive, easy-to-use platform that makes it easy for your teams and stakeholders to get up and running quickly
• Regular feature releases and an innovative roadmap that shows a commitment to continuous improvement
• A robust customer success and support engine that’s on hand to help you unlock even more value from your investment

Keelvar’s user-friendly UI removes the need for complex training or onboarding, so teams can see ROI even faster 

Research supplier market 

Researching the supplier market reveals where the risks and opportunities lie. Explore criteria like market trends, supplier capabilities, and pricing, then factor these learnings into your decision-making process. (Or better yet: let Sourcing Optimizer build them into scenario analysis for you.)

Focus on total cost of ownership (TCO) 

We know, we know: we’ve mentioned this one a lot, but its importance cannot be overstated. If you want to adopt strategic sourcing, you need to consider all of the costs associated with goods or services. This includes (but is not limited to):

• Acquisition costs like initial purchase, delivery, and installation
• Operational costs like energy bills, staff training, and the cost of ongoing labor
• Maintenance costs like routine repairs or replacing broken parts
• Disposal costs when the asset is no longer needed
  

All of these costs need to be considered when evaluating the long-term value—not just the initial sticker price.  

Build strong supplier relationships 

Use your eSourcing solution to streamline supplier management and build stronger relationships. Quickly provide bid feedback or communicate with suppliers from one central platform, creating an open communication channel that fosters collaboration and trust.