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On February 14, ESADE Alumni hosted another Refresher Programme talk; ''The management of external resources: strategic sourcing'' by Professor Ramon Sagarra, academic collaborator in ESADE’s Department of General Management and Strategy.
Professor Sagarra began by analysing today’s economic scenario and explaining how important it was for companies and managers to develop their talent and capabilities with a view to increasing their long-term competitive edge. Sagarra insisted that a company’s profitability was directly related to its effective use of its in-house resources and also the external resources provided by its network of suppliers.
''Cost cutting continues to be the most important factor. Anyone who tries to convince the management to pay higher prices, regardless of quality, will probably end up on the street,'' he warned the audience before insisting once again on the need to optimize spending – an essential aim in any company.
However, another management goal and strategy is to transform ones company into a supplier’s best customer in order to ensure more bargaining clout. In this respect, Sagarra mentioned the importance of strategic sourcing, i.e. a methodology intended to reduce the overall cost of materials, goods and services by pinpointing the best types of supply offering the best quality for the lowest price and choosing the most suitable suppliers.
''When choosing a supplier, it is essential to be very careful and to analyse their standing and solvency,'' the professor recommended. It is important to be aware of these risks and handle them as effectively as possible.
Strategic sourcing is more than just procurement. It is a radical transformation of the traditional purchasing model into the management of external resources, an area that creates value and closer contact with suppliers. Strategic sourcing gets suppliers more involved in the business model and the company’s particular needs, and this adds value. Strategic sourcing is thus defined as the acquisition from external resources of goods, services and the knowledge and innovation needed to create and maintain the company’s competitive edge.
But who takes care of managing a company’s external resources? No one in particular. It is, therefore, necessary to organise this task within a well-defined framework. Strategic sourcing calls for a manager with business acumen able to see look beyond cost-benefit assessments and, by understanding the company’s real needs, ensure the best solution the market can provide.
Sourcing managers are responsible for matching corporate needs to the capabilities of suppliers, and this calls for the creation of a plan which integrates the company, knowledge of the supplier market, and the ability to reduce and streamline purchasing and other processes immediately. Their main management qualities are their business outlook, and their ability to work in teams and attract talent. In short, a shift from purchasing manager to sourcing manager fully capable of dealing with corporate management.
The transformation of a traditional purchasing division into a sourcing management model is not an easy task. The firm’s managers must be familiar with this approach and willing to throw their weight behind it. They must also take into account what it will contribute to business and its immediate and long-term impact. In short, management planning is a must if the specified goals are to be attained.
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