10 critical success factors to strategic sourcing

Strategic sourcing requires a systematic approach by skilled individuals, using strong processes and technology to support it.

That’s the view of Asif Khan, a senior manager for global procurement project management at DP World, headquartered in Dubai, which owns and manages ports around the globe.

Describing the scale of the operation, he said: “There are 15m containers travelling somewhere right now containing 90% of all the things you need.”

He said DP World’s CEO mandates ‘value creation’ through savings, technology, innovation and new business. “It’s extremely important procurement aligns itself to the business vision and corporate strategy,” said Khan. He said it does this in a number of ways.

It creates annual procurement plans working with colleagues in technical departments to help forecast sourcing requirements. “It’s ideal to do a three-year plan but if you want to maintain agility, go for one year.”

It aggregates demand at a regional level and considers quick-win opportunities before moving on to more complex areas to make savings or improvements. It identifies major supply chain risks based on the level of spend and how strategic the supply is.

It takes a global approach to supplier relationship management, rather than basing it on a single contract and streamlines its sourcing work across the various parts of the group. 

Khan said the methodology at DP World was to analyse spend categories to establish a baseline and understand where it had leverage; carry out market research to see what is available at what cost; do a request for information/quotes process to identify suppliers and develop sourcing strategy steps; deliver value by improving upon pricing and contract terms; and then measure KPIs on the deal and work on continuous improvement.

“If you’re smart and credible about feeding information back you can gain buy-in from others and keep the project alive,” he said, before adding that the procurement team analysed three years of snapshot spend data to analyse the company’s expenditure.

And, in an insight to deal-making at DP World, he highlighted an occasion where the team invited shortlisted suppliers in on the same day and hopped from one soundproofed room to another to negotiate the best contract.

Khan named the following as critical success factors to strategic sourcing based around the three key areas of people, processes and technology:

  1. Know your market and suppliers
  2. Use technology to support the execution of your strategy
  3. Obtain executive-level support
  4. Establish a credible team
  5. Adopt a company-wide supply chain focus
  6. Enforce compliance
  7. Engage stakeholders
  8. Encourage supplier innovation
  9. Set up adequate reporting metrics to demonstrate success
  10. Carry out continuous improvement: “We try to improve on every project, every time,” said Khan.
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