past, organization used to highly focus on tactical functions :
seemingly endless processing of purchasing orders, checking on delivery
status etc. These, in turn provided limited contribution to corporate
approaches often resulted in engineering-driven supplier selection
processes. This results in huge numbers of suppliers commanding-and
receiving-premium prices. The supply chains become so complicated
that inventories became bloated and impossible to offload when business
crumbled, as it did in 2001.
to reduce the cost of sourcing, companies often ended up squeezing
the suppliers who in turn reduced the quality of the material delivered,
to achieve low cost.
have now recognized the importance of strategic sourcing practices
as a key component of improved profitability. The goal of strategic
sourcing is to optimize (not necessarily minimize) the total landed
cost of externally purchased material while simultaneously increase
supplier responsiveness, material quality and service.