How do you measure the impact of your sourcing strategy on your business performance?

Quantify your sourcing strategy's impact through rigorous analysis of critical metrics—cost savings, vendor reliability, and product quality. Scrutinize procurement efficiency and adaptability to market shifts. Measure customer satisfaction and time-to-market for products. A well-crafted strategy harmonizes sourcing with business objectives, propelling overall performance and profitability. Regularly scrutinize these benchmarks to fortify sustained success and strategic agility, ensuring your business thrives in a dynamic and competitive landscape.

To measure the impact of our sourcing strategy on business performance, it is crucial to align sourcing strategies with the business objectives. Key Performance Indicators, KPIs should be meticulously defined to measure the outcomes of sourcing efforts, and ongoing progress should be consistently monitored. This approach enables to quantifiably assess the impact of sourcing strategies on overall business performance.

Measuring the impact of procurement strategies on business performance is a critical yet complex task for procurement professionals. It requires a holistic approach that goes beyond traditional cost-saving metrics to encompass broader business objectives. One key aspect of measuring procurement impact is aligning procurement goals with overall business strategies. This means identifying key performance indicators (KPIs) that reflect not just procurement efficiency, but also how procurement contributes to revenue growth, innovation, sustainability, and risk management. Financial metrics remain important, such as cost savings, spend under management, and return on investment (ROI) for procurement initiatives.

I measure the impact of my sourcing strategy by tracking these KPIs: * Cost savings: I analyze cost reductions compared to previous periods or industry benchmarks to quantify the financial benefits. * Supplier performance: I monitor on-time delivery, quality, and compliance with agreed-upon terms to ensure consistent and reliable supply. * Risk mitigation: I assess the resilience of my supply chain and identify potential disruptions to minimize their impact on the business. * Innovation: I evaluate the introduction of new products or services sourced from suppliers to drive business growth. * Customer satisfaction: I measure the impact of improved sourcing on customer experience to ensure it aligns with overall business objectives.

Measuring the impact of your sourcing strategy starts with aligning it to business goals. Track cost savings, but go beyond that; evaluate how supplier relationships drive innovation, improve quality, and reduce lead times. Assess operational efficiency by analyzing procurement cycle times and adherence to delivery schedules. Factor in risk management by reviewing supplier compliance and incident response rates. Finally, connect sourcing outcomes to broader business metrics, like revenue growth or customer satisfaction. A well-executed sourcing strategy should create measurable value across multiple dimensions of performance.

One area to focus on is buy in from ops, which you can measure by the engagement (or compliance) % of spend in approved versus unapproved suppliers. If you have categories with very high engagement, good sales performance, strong availability and supply chain metrics, then this suggests your sourcing strategy is working. Conversely, if the engagement % is low, sales aren't performing, and supply chain metrics are poor, then this suggests you have work to do!

In my experience, a strong tracking tool is key. Next , standard terms have to be defined and agreed upon with stakeholders. Finally, procurement must align with Finance on the KPIs so that when the report is out its trustworthy. I've seen a rise IT tools for procurement to track sourcing and savings.

Over time, I've seen different metrics, but in general, there is convergence in metrics that can be compared within different Business units in a company or externally. They are: 1) Savings as % of spend 2) Ratio of total procurement cost (mainly payroll) vs savings 3) Tracking the the cost of goods/revenue (to be shared with sales and procurement)

In my experience, reporting must use a language that stakeholders understand. Therefore, often is required to "translate" from procurement language to business language. Keeping consistency in reporting format is also key.

I've seen that numbers are important, but also including cases that illustrate the impact of sourcing strategy can help to improve engagement. Especially if you can collect endorsement texts to add along pictures and descriptions of the sourcing project.

The impact of a sourcing strategy on business performance can be measured through various methods. These include: 1. Comparing internal versus external costs 2. Assessing supplier performance by monitoring key metrics 3. Evaluating time-to-market by reducing lead times 4. Assessing risk mitigation by minimizing supply chain disruptions 5. Assessing customer satisfaction by analyzing feedback 6. Tracking key performance indicators (KPIs) like cost savings percentage 7. Supplier performance score 8. Lead time reduction 8. Risk mitigation level By combining these methods, businesses can gain insights into their sourcing strategy's impact on business performance and make informed decisions to optimize and improve sourcing practices.

We buy goods or sercives from the suppliers. We add value on them and sell them. So for the go-to-market, there are two important bits. (1). Our potential to secure supplies (of goods and services) (2). Our potential to add value to them So I think, your sourcing strategy should have a direct impact on your go-to-market matrix. Your project management time must come down, and if your sourcing strategy is perfect.

Measuring the impact of your sourcing strategy on business performance involves tracking metrics like cost savings, supplier performance, inventory levels, and overall profitability. Conducting regular reviews and analysis, comparing before and after implementing sourcing strategies, can help measure their effectiveness.