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With 83% of companies concerned about inflation and rising commodity prices, one thing is clear: it’s time for procurement to evolve.

Focusing solely on immediate needs is no longer enough. Now, you must find ways to protect your company from future supply chain disruptions and risks.

That’s where strategic sourcing comes in.

This process is all about building long-term resilience and agility, helping your company navigate uncertainty with confidence.

In this article, we’ll break down everything you need to know about it, including what strategic sourcing really means, the biggest misconceptions, and the best tools to streamline the process.

Ready to get strategic?

How Strategic Sourcing Differs from Traditional Procurement

Strategic sourcing is a supply chain management process that uses procurement data to maximize value from purchasing decisions and align them with broader business goals.

As such, it differs from traditional procurement in focus, approach, and priorities.

Here’s a quick breakdown of some key differences:

Source: Veridion

As you can see, strategic sourcing is far more complex than traditional procurement, prioritizing long-term value, resilience, and agility over simply fulfilling immediate needs.

But why is this even necessary? Why not just stick to the basics?

Well, because businesses simply can’t afford to anymore.

Supply chains are more volatile than ever, regulations are tightening, and disruptions lurk around every corner.

If you’re not thinking strategically, you’re putting the company at significant risk.

Just look at the findings from the 2024 KPMG survey.

As it turns out, 77% of procurement professionals cite supply disruption as a critical external challenge, while 83% worry about inflationary pressures and rising commodity prices.

On top of that, 66% say that growing regulatory and ESG demands will also significantly shape sourcing over the next 3 to 5 years.

Illustration: Veridion / Data: KPMG

Put simply, with all these sustainability pressures, rising costs, and unexpected disruptions, the old way just doesn’t cut it anymore.

In order to tackle these issues head-on, we need a more data-driven, future-focused approach.

And that’s what strategic sourcing is all about.

Common Misconceptions About Strategic Sourcing

With strategic sourcing becoming increasingly important, discussions around it have also grown.

However, this has led to certain misconceptions about the process.

Let’s debunk the most common ones.

It Only Involves the Procurement Team

Unlike traditional procurement, strategic sourcing isn’t limited to the procurement team alone.

Instead, it requires cross-functional collaboration with finance, operations, legal, and other departments to ensure all decisions align with broader business objectives.

This misconception is pretty common since, historically, procurement has always operated in its own silo, focused on cost-cutting rather than organization-wide impact.

Philip Ideson, the founder of Art of Procurement, a procurement consultancy, agrees:

Illustration: Veridion / Quote: Economist Impact

He sees this as one of the biggest barriers preventing procurement from delivering greater value to organizations.

Without cross-departmental collaboration, you miss out on vital insights and, consequently, on opportunities to come up with truly meaningful sourcing strategies.

Christina Nemeyer, Director of Corporate Strategic Sourcing at Performance Food Group (PFG), one of North America’s largest foodservice distribution companies, knows this very well.

That’s why, when PFG was procuring driver uniforms for the first time, Nemeyer took a more inclusive approach:

Illustration: Veridion / Quote: Inbound Logistics

After gathering feedback, she sourced samples and had a pilot group test them to determine the best option.

The result?

A custom uniform program that checked all the boxes: safety, comfort, cost-effectiveness, and brand appeal, all through a collaborative sourcing process:

“The uniforms build on the PFG brand and help with cost control. […] Purchasing uniforms saves time and money, and looks better. It’s a win-win and it was wonderful to be a part of that.”

This is exactly what sets strategic sourcing apart—it brings people together to make better, more informed decisions that benefit the entire organization.

It’s Only for Large Companies

Many still believe that strategic sourcing is reserved only for large organizations.

But in reality, businesses of all sizes benefit from it.

After all, small companies are affected by disruptions just as much as larger ones and require a data-driven approach to overcome supply chain obstacles.

Don’t believe us?

Let’s take a look at the findings of the 2024 Verizon Business survey, which reveals some of the challenges faced by small businesses today.

Worryingly, 71% report having experienced increased costs in the past year, while 40% faced issues sourcing materials due to supply chain interruptions.

Moreover, 34% had to dip into cash reserves to stay afloat.

Illustration: Veridion / Data: Verizon

This data makes one thing clear: smaller companies are not immune to inflation, economic downturns, or supply chain volatility.

In fact, they may be even more vulnerable, says Todd Heimes, VP of Amazon Business:

Illustration: Veridion / Quote: Chain Store Age

For them, every dollar counts.

And that is exactly why strategic sourcing should matter to SMEs, too.

Now, here is some good news: you don’t need the resources of big companies to implement strategic sourcing.  

This is a flexible process that adapts to your needs, no matter how small your company is.

Here’s what you can do:

Prioritize	Begin with the categories your business absolutely cannot function without.
Test and iterate	Implement strategic sourcing in those key categories, refine your approach based on results, and then expand.
Try to find budget-friendly tools	You don’t need expensive, custom-built systems. Instead, look for low-cost solutions that will help you automate certain workflows, such as supplier discovery, contract management, etc.

And remember: just because you run a smaller enterprise, it doesn’t mean you can’t unlock resiliency, agility, or long-term success for your business.

All it takes is a bit of effort and patience.

It’s a One-Time Process

Strategic sourcing is an ongoing process, not a one-time task.

It requires continuously assessing the market, your current strategies, and, most importantly, your suppliers’ performance.

That’s the only way to mitigate risks and identify opportunities for improvement.

Kevin Beasley, CIO at VAI, a midmarket ERP software developer, thinks so, too:

Illustration: Veridion / Quote: CIO

Without these regular evaluations, you could find yourself in serious trouble.

Supplier quality can slip when left unchecked, affecting your operations, reputation, and bottom line.

It happens more often than you might think.

Toyota, for instance, had to learn this lesson the hard way.

Back in 2010, after Toyota began auditing suppliers of high-priority parts, they discovered that some of them weren’t complying with the company’s expectations.

More specifically, it was revealed that some suppliers were performing only one quality audit per year instead of the mandated four.

Source: MotorTrend

And the consequences were quite severe.

From 2009 to 2011, Toyota faced a major vehicle recall crisis, leading to a decline in sales, stock price, and overall profitability, all due to quality and safety concerns.

Dino Triantafyllos, their former VP of North American Product Quality, even admitted that the damage might have been avoided, had they caught the issue sooner:

Illustration: Veridion / Quote: MotorTrend

That’s precisely why those well-versed in strategic sourcing never forgo regular, thorough supplier evaluations.

They understand that proactive risk mitigation is well worth the time and effort.

Tools for Efficient Strategic Sourcing

Strategic sourcing may be an ongoing process, but with the right tools, it doesn’t have to be overwhelming or time-consuming.

Let’s explore some solutions to streamline key workflows.

Spend Analysis Tools

Strategic sourcing typically begins with spend analysis to uncover spending patterns, inefficiencies, and specific sourcing needs.

The best tool for the job? Spend analysis software.

These solutions automate the entire process of collecting, cleansing, classifying, and analyzing spend data across various IT systems, financial records, and business units.

Ultimately, they present all these valuable insights through configurable analytics dashboards, as shown below:

Source: SAP

These solutions provide a plethora of pre-configured reports with category- and supplier-level metrics.

Through these reports, you can quickly spot non-compliant spend, supplier overreliance, and cost-saving opportunities that might otherwise go completely unnoticed.

And the analytics capabilities of these tools are only getting smarter.

With AI and ML integrations, some solutions now offer what-if analysis, helping you evaluate the effectiveness of different strategies before you even implement them.

See this feature in action in the video below:

Source: Accelytics Consulting, LLC on YouTube

Overall, spend analysis tools provide unmatched visibility and control, giving you a complete, accurate picture of company spend.

This is the very foundation for informed, data-driven decision-making in strategic sourcing.

Supplier Intelligence Platforms

Once you have a full understanding of your company’s spending and needs, the next step is to find suppliers that can meet those requirements.

For this, it’s best to leverage supplier intelligence platforms like our Veridion.

Powered by AI and machine learning, Veridion makes supplier discovery faster and more efficient than ever, helping you uncover vendors you might never find on your own.

Source: Veridion

Our platform offers access to a vast global database of millions of companies, along with detailed insights into their financials, ESG performance, operational risks, compliance, and more.

And because our data is updated weekly, you can always count on it being fresh, accurate, and complete.

But even though Veridion’s data is rich and complex, using it is incredibly simple.

With our latest tool, Scout, all you need to do is type what you’re looking for using natural language, and the system delivers.

You can see how it all works in the video below:

Source: Veridion on YouTube

Whether you’re searching for a supplier with a specific certification, in a particular location, or of a certain company size, Scout can find what you need.

Without this kind of tool, you’d be spending weeks, if not months, researching potential partners—often relying on outdated and inaccurate information.

Source: Veridion

But with Veridion, you unlock easier, faster, and more data-driven supplier scouting—the most crucial component of strategic sourcing.

Contract Lifecycle Management (CLM) Software

After identifying reliable new partners, it’s time for contract negotiation.

This is where CLM software comes into play, automating the entire contracting process, centralizing all relevant documents in a single source of truth, and ensuring compliance.

For instance, CLM tools streamline contract authoring by enabling you to create templates with pre-built clause libraries and custom fields in just a few clicks:

Source: Gatekeeper

They also allow you to auto-populate new agreements with data from your existing systems and set conditional rules for various workflows, like reviewing non-standard terms.

But that’s just the start.

With automated approval workflows, electronic signatures, and built-in reporting, these solutions make negotiating and finalizing contracts smoother than ever.

And what about post-execution? CLM software has that covered, too.

It can send automated alerts for expirations, renewals, and compliance deviations, significantly reducing your risk exposure:

Source: Gatekeeper

In fact, such a proactive approach enables you to prepare for renewals and renegotiations in advance, helping you maximize the value of your partnerships.

According to the 2024 Icertis report, 70% of businesses lack adequate contract visibility and experience 8.6% contract value erosion due to weaknesses in the contracting process.

Illustration: Veridion / Data: Icertis

CLM is developed to eliminate these weaknesses, giving you complete control and making every contract work harder for your business.

Supplier Relationship Management (SRM) Platforms

Think of the SRM platforms as your all-in-one solutions for tracking and managing supplier performance, communication, and compliance.

Instead of drowning in scattered data, they bring everything together in one centralized hub, giving you instant access to critical insights.

For suppliers, the onboarding process becomes a breeze.

They can self-onboard, submitting their product or service offerings, certificates, and other essential information—saving everyone time and hassle in the process.

Check out the video below to learn more:

Source: Zycus Inc. on YouTube

Once onboarded, performance tracking becomes a walk in the park, too.

With supplier scorecards, you can continuously evaluate and improve their performance across areas like quality, delivery, collaboration, innovation, or sustainability, as shown below:

Source: Vendorful

And because these systems are typically fully customizable, you get to set your own KPIs and rating schemes to fit your needs.

To ensure you never miss anything important, the system will even notify you in real time if there are changes in a supplier’s practices or performance.

Moreover, if you pick a solution that offers an app, you can use it for on-site visits as well.

Source: Kodiak Hub

This way, you could build an audit agenda based on your knowledge of the supplier, create checklists, and upload photos and documents, all on the go.

No more spreadsheets, no more lost data, and, most importantly, no more subjective decisions.

With SRM solutions, everything you need to efficiently manage your suppliers and ensure their quality doesn’t drop is right there in front of you.

Conclusion

The most important thing to know about strategic sourcing is this: data is at the core of everything.

Whether you’re assessing your needs, searching for new suppliers, or trying to maximize the value of your contracts, you need fresh, accurate, and detailed insights to achieve your goals.

That’s right: with reliable data, you can better anticipate risks, partner with the best suppliers, and build long-term resiliency and agility.

It’s that powerful!

So, are you ready to boost your role from a traditional, cost-cutting procurement professional to a true strategic partner within your company?