For the Procurement Specialist the 7 Step Strategic Sourcing Process is a tried and true universally accepted method and is now considered best practice. While the primary objective of strategic sourcing is to save money, there are other reasons that are becoming increasingly important to business and government alike. These include improving the quality of the procurement process, improving supplier performance, minimising risk, satisfying government, shareholder and community expectations and minimising risk.
The 7-step process is designed to follow in the correct order, and it is vitally important to ensure that each step is carried out thoroughly and professionally.
Step 1- Profile the Category
Understand everything about the spend category as the first step in the strategic sourcing process. This is going to look different if you are a local government, a federal department, multinational corporation or a small start-up. As a strategic sourcing professional, you should have an acute understanding of this category as it pertains to the type of setting you are in. Define the category and commodities in it.
What is the current quantity used, types and sizes? Who are the users, where are they located, what are the processes used and who else is involved in the supply chain?
Data must be accurate, clean documented in as much detail as possible, as changes may be needed.
Step 2 – Supply Market Analysis
Identify potential new global and local suppliers. It can be very tempting to primarily focus on key suppliers that you are already using. While you don’t want to damage long-standing and high value relationships, in your analysis make certain they are high value and not just long-standing. Study the cost components of the product or service and analyse the suppliers’ marketplace for risks and opportunities. Key raw material prices and other variables such as labour and transportation must be priced and calculations done of the suppliers’ cost elements. Make certain that the information you are collecting is accurate and not speculative, as you may may not have the time to go back and correct any assumptions later on.
Step 3 – Develop the Strategy
Deciding where to buy while minimising risk and costs is how you develop the strategic sourcing strategy. Using a cross-functional project team is a must. The strategy will depend on what real alternatives there are to the current suppliers, how competitive the supplier marketplace is and importantly, how open the users are to new suppliers.
Step 4 – Select the Sourcing Process
The most common method of sourcing is to use a Request for Proposal process for soliciting bids. It includes product or service specifications, delivery and service requirements, pricing breakdown & cost analysis & legal and financial terms & conditions. Often, the evaluation criteria are also stated. If you are representing a government agency, Not for Profit or charity, your sourcing process is also going to have a high level of Probity oversight. Make certain your sourcing documents are well written and that ample time has been set aside for review.
This is especially important for the Specification. Poorly written Specifications lead to poor contracts and poor outcomes, if there is an outcome at all!
Step 5 – Negotiate & Select Suppliers
The first round of the negotiation process, after reducing the bids to the valid ones, is conducted with many suppliers asking for clarifications and more detail where needed. A good strategic sourcing strategy is to conduct multiple rounds of negotiations to get to a short list. The final selection is usually done by the team and signed off as per the approval process. If you are using a Probity, be sure to follow it. Make certain that this stage is fair and transparent, especially internally, so that there can be no question that the selection panel have arrived at the best decision for the outcome.
Step 6 – Implement & Integrate
Notify the successful suppliers and ensure that they are involved in the implementation process.
Step 7 – Benchmark & Track Results
This is a key element of the sourcing management process. It is the start of a continuous cycle, starting with benchmarking the current status of the commodity or category, monitoring the results and ensuring that full value is being achieved. Then back to Step 1 to review the supply market again and restart the process in a constantly evolving marketplace.
Following this process will result in increased knowledge in the categories and markets in which you are specialising and increased data as well as improved contract management.
M. Hamilton
Copyright 2026 Procure Horizon
