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You often hear that procurement can reduce costs, strengthen supplier relationships, and boost a company’s resilience—so why aren’t you seeing those benefits in your company?

The answer might be your strategic sourcing process.

Strategic sourcing isn’t just about securing the lowest price. It’s about creating long-term value, ensuring supply chain stability, and gaining a competitive advantage.

But to unlock these perks, you need a strong, well-executed process.

That’s why, in this article, we’re breaking down the seven essential steps to help you nail strategic sourcing and get excellent procurement results, every single time.

1. Assess Current Spend

The very first step in strategic sourcing is spend analysis—the process of gathering and analyzing spend data to pinpoint key spending categories, cost drivers, and inefficiencies.

In essence, the purpose of this analysis is to answer the following questions:

• What are we spending money on?
• How much have we paid?
• Who are we buying from?
• Is there a better way to fulfill our business needs?

By conducting spend analysis, you gain a clear understanding of your organization’s spending habits, making it easier to determine sourcing requirements and cost-saving opportunities.

Nicolas Olague, Senior Manager at Amazon, elaborates:

Illustration: Veridion / Quote: Independent

For instance, if your evaluation reveals that a significant portion of your budget is tied to a single supplier, this could be a red flag for over-reliance.

In that case, diversifying your supplier base can help mitigate risk and boost supply chain resilience.

Now, to achieve the best results during this phase, prioritize interdepartmental collaboration.

A truly accurate and thorough analysis requires input from stakeholders across all teams, especially finance.

While you, as a procurement professional, have detailed knowledge of suppliers, contracts, and purchasing processes, your colleagues from finance can offer a broader view of financial data, budgets, and cash flow.

By working together, you create a more data-driven and actionable picture of organizational spending.

Deloitte has already confirmed that integrating procurement and finance drives considerable benefits for the entire company.

This includes a 20% to 40% increase in realized savings and a 10% to 30% improvement in operational efficiency.

Illustration: Veridion / Data: Deloitte

Therefore, before moving on to the next step, ensure you’ve consulted finance and other relevant departments.

A well-rounded analysis will set the stage for more informed decisions, greater efficiency, and stronger sourcing outcomes down the line.

2. Develop a Sourcing Strategy

Once you understand the current state of your spend and needs, you can develop the best sourcing strategy based on what you’ve learned.

For example:

• If you rely too heavily on a single supplier and want to reduce dependency, consider multi-sourcing.
• If you work with too many suppliers and want to simplify relationship management while increasing bargaining power, consolidate your supplier base.
• If you aim to cut costs in a particular product category, explore global procurement and sourcing from lower-cost countries.

By aligning your sourcing strategy with business objectives and supply chain goals from the get-go, the rest of the process becomes much more efficient.

You’ll be better equipped to define supplier criteria or product specifications and negotiate effectively—because you’ll already have a clear vision of what you’re aiming for.

However, don’t concentrate solely on cost-cutting here.

Strategic sourcing is about more than just decreasing expenses; it’s about creating long-term value.

A 2023 KPMG survey reveals that 80% of sourcing leaders prioritize budget impact, while 75% focus on value beyond savings.

Illustration: Veridion / Data: KPMG

This means that yes, saving money is important, but your objectives should be much broader.

Therefore, try to balance cost with other factors like quality, delivery time, innovation, or sustainability while developing your strategy.

Procurement expert Zoë Singleton, VP of Procurement at Macy’s, agrees, summarizing the strategic role of procurement perfectly:

Illustration: Veridion / Quote: CPOstrategy

So, instead of just reducing spend, focus on spending more wisely, ensuring every dollar contributes to your company’s growth and success.

3. Conduct Supplier Research

Now that you know what you want to achieve and how to achieve it, it’s time to select the right partners to help you get there.

During this phase, you’ll be researching the market for potential suppliers and evaluating their:

• Capacity
• Performance
• Risk factors

This step is particularly important because, if you pick reliable partners, you protect your company from various disruptions and ensure long-term stability.

The 2022 Ivalua and Forrester survey highlights the growing recognition of suppliers’ importance in this context.

As it turns out, 68% of companies see them as a source of differentiation, 66% collaborate with them to boost supply resilience, and 51% plan to deepen collaboration.

Illustration: Veridion / Data: Ivalua

However, you can’t effectively collaborate with just about anyone.

That’s where this step comes into play, enabling you to fully understand vendors’ reliability and potential for long-term partnerships.

Therefore, don’t look for suppliers with the lowest prices.

Instead, be more thorough, urges Manav Bhasin, VP and CIO at IT services provider Presidio:

Illustration: Veridion / Quote: CIO

That sounds like a lot of work, doesn’t it?

But here’s the good news: with the right tools, it doesn’t have to be.

With AI-powered supplier discovery platforms like our Veridion, you get instant access to a vast global database of millions of vendors, products, and services.

Source: Veridion

No more inefficient, manual research—just fast, data-driven supplier sourcing.

Using our latest tool, Scout, you just describe what you need in plain, natural language, and Scout does the heavy lifting for you.

For example, you might type:

“I want to find suppliers of biodegradable cleaning agents for plant sanitation in the APAC region, except Japan.”

Instantly, Scout delivers a list of eligible suppliers that match your exact criteria.

Location, certifications, product types—you name it, Scout finds it.

Learn more about it here:

Source: Veridion on YouTube

Since Scout is currently in beta, you can be among the first to experience its game-changing power.

So, don’t miss out. Request early access through our website and discover how easy supplier discovery can be.

4. Implement the RFx Process

After choosing potential candidates, you need to solicit RFPs or RFQs from them and analyze their responses.

Marijn Overvest, founder of Procurement Tactics, a procurement training and resources provider, used the same process when he worked as a procurement manager.

He outlines its benefits:

Illustration: Veridion / Quote: Procurement Tactics

By providing all suppliers with the same questions and information, he ensured a fair and objective comparison of what each vendor could deliver.

This allowed for a more data-driven and, ultimately, better-informed selection process.

But how do you know whether to issue an RFP or an RFQ?

Here’s a quick breakdown:

RFP (Request for Proposal)	Used when an organization has a specific project or requirement and wants detailed proposals from potential suppliers or service providers. Vendors are expected to provide technical solutions, pricing, timelines, and other relevant information.
RFQ (Request for Quotation)	Used when an organization has well-defined product or service needs and is primarily focused on cost. RFQs request price quotations based on specific product or service details and other commercial terms.

Here, it’s important to keep RFxs supplier-friendly.

To do so, try to make your requests clear and concise, avoiding unnecessary complexity or ambiguity.

Plus, set a realistic timeline and give suppliers enough time to prepare quality responses.

The 2024 HICX survey shows that suppliers are already overloaded with requests as is.

In fact, 61% of them report receiving too many information requests from their most important customers, and 54% say they could respond more accurately if the process were made easier.

Illustration: Veridion / Data: HICX

So, why not make it a bit easier for them?

Before sending out requests, ask yourself: “Would filling out this document be too much of a hassle?”

If so, see if you can simplify it—it’ll result in better responses.

And such responses directly translate to better decision-making.

5. Negotiate with Suppliers

In this step, you engage in contract negotiations on pricing, service level agreements, payment terms, delivery schedules, and more.

Done right, this process ensures a strong business relationship with clear expectations on both sides, minimizing disputes and disruptions.

So, let’s break down what it means to do supplier negotiations right.

First, you should define your priorities.

Obviously, price is often the first thing that comes to mind, and in some cases, securing the lowest cost makes perfect sense.

Jonathan O’Brien, CEO of Positive Purchasing, a company specializing in training and consulting for strategic procurement and negotiation, explains:

“Leveraging buying power to secure the lowest price in a marketplace is entirely valid for many scenarios, for example when buying generic, non-differentiated products or services from competitive markets where there are many providers and it is easy to switch.”

But if you’re looking for lasting, collaborative relationships, focusing on price alone won’t cut it.

Instead, aim for a win-win approach.

Achint Arora, partner at a global research firm, Everest Group, describes what that means:

Illustration: Veridion / Quote: CIO

Yes, this requires more effort but it leads to a deal that delivers value for both parties, strengthens relationships, and unlocks better long-term outcomes.

Second, plan for uncertainty.

Your contracts should be flexible and account for potential risks.

Lucy Larkin, partner at an independent business and technology consultancy, Baringa Partners, advises:

“There are often unplanned events. It’s worthwhile looking at this upfront to determine what these might be, and to build a mechanism into the contract that addresses actions and commercials for unplanned situations.”

An exit plan is also essential, but termination shouldn’t be the only option.

Instead, build in service-level agreements that create middle-ground solutions.

Nada Alnajafi, Senior Corporate Counsel at the global investment management organization, Franklin Templeton, suggests:

Illustration: Veridion / Quote: Legal Dive

The bottom line is this: successful contract negotiations aren’t just about getting the best deal for yourself.

They’re about creating agreements that work for everyone.

By prioritizing collaboration, planning for the unexpected, and ensuring fairness, you’ll set up partnerships that last.

At the end of the day, that’s what strategic sourcing is all about.

6. Onboard New Suppliers

Finally, you’ve struck a deal with your suppliers.

Now, to ensure clear communication and smooth collaboration throughout the relationship, you need to integrate new partners into your internal systems.

Otherwise, you might encounter certain challenges, warns Albert Kim, VP of Talent at Checkr, a company providing employee background screening:

Illustration: Veridion / Quote: Softr

In other words, if onboarding is inefficient, you may miscommunicate or misunderstand your suppliers, leading to unmet expectations for both parties.

To minimize this risk, streamlining the onboarding process is essential.

How do you achieve that?

Automation, says Cache Merrill, founder of Zibtek, a company specializing in US-managed offshore development:

Illustration: Veridion / Quote: Softr

An automated, centralized platform helps you standardize data entry, eliminate error-prone manual work, and keep vendor information consistent across your entire tech stack.

One of the best ways to automate onboarding?

Supplier relationship management (SRM) software. 

Many of these tools offer customizable supplier self-registration (shown below), making it simple for new vendors to submit the required info, documents, and certifications.

Source: Kodiak Hub

Everything is stored in one place, so your team can access what they need anytime—resulting in faster, data-driven decision-making.

With this kind of software, you can also track every step of the onboarding process with clear status updates and workflow visualizations, as shown in the example below:

Source: Kodiak Hub

That way, you never lose sight of supper responsibilities.

See? Supplier onboarding doesn’t have to be cumbersome or time-consuming at all.

With the right tools, you can make the process efficient, organized, and hassle-free for everyone involved.

7. Monitor Supplier Performance

Just because all the contracts are signed and the suppliers are onboarded doesn’t mean your work is done.

Supplier performance should be constantly monitored through periodic reviews and audits to drive improvement and accountability.

So, how do you make this process more effective?

It all comes down to two simple yet powerful tools: KPIs and supplier scorecards.

The first step is identifying the most important metrics for measuring your suppliers’ performance.

They typically vary by organization, but some of the most common KPIs across industries are:

• Quality of goods or services
• On-time delivery
• Responsiveness
• Compliance
• Pricing

This is a solid starting point for performance tracking.

And, as your needs change and you get more familiar with the process, you can always customize these metrics and introduce new ones to better fit your business.

Once you’ve identified your core KPIs, set specific targets or thresholds for each.

For example, you might aim for 90% on-time delivery and 95% quality compliance.

However, specific benchmarks, yet again, depend on your industry.

Rob Ruffin, expert partner at a global consultancy firm, Bain & Company, explains:

“[…] for instance, success on the speed dimension in retail might be same-day delivery where an industrial manufacturer might outperform peers with lead-times measured in days.”

Now it’s time to put those KPIs to work.

Supplier scorecards are the easiest way to rate supplier performance based on your KPIs and their respective weights.

Elisabeth Mast, Senior Director of Sourcing and Production at Patagonia, an American retailer of outdoor recreation equipment, uses them, too.

She explains why they are such a powerful tool:  

Illustration: Veridion / Quote: Supply Chain Dive

Like KPIs, your scorecard can (and should) evolve to align with changing business needs.

Just make sure to keep your suppliers in the loop about both your expectations and their results.

Conclusion

As you can see, the strategic sourcing process never truly ends.

But don’t let that intimidate you.

With digital procurement tools, you can streamline your activities and save valuable time.

Whether it’s supplier intelligence platforms for lightning-fast supplier discovery or SRM systems that streamline onboarding and communication, optimizing your workflows has never been easier.

And as a result, you get more time to focus on what truly matters: driving agility, resilience, and competitive advantage.