Strategic , Strategic Sourcing .

Many of the initiatives associated with strategic sourcing - dividing spend into categories of critical importance, establishing differing metrics for different levels of suppliers - are in place at some leading organizations. So, what is on the horizon for this aspect of the purchasing and supply field?

Let's start with the well-known quadrant that divides suppliers into four categories, based on amount of spend and criticality of the product or service. Typically, the most important buys with the most complex suppliers fall into the "strategic" quadrant. Now imagine that box divided into even more specific categories. There will be some strategic suppliers with whom relationships are formed, based on their ability to refine existing processes for cost reduction and cost saving objectives. Process improvements and integrated relationships that add value are stressed. But, there will be other strategic suppliers with whom the objectives are something different entirely. They will be chosen based on their ability to create joint ventures with the purchasing organization, resulting in a whole new source of business.

For example, imagine you're choosing a software provider, with whom you'll be establishing a strategic relationship. But you're not only looking at the provider to develop customized solutions that you know will bring value to your organization. You enter into the relationship with the full intention that at some point, your organization and the supplier organization will take that new product or service - developed through team effort - to market together, providing both organizations with a whole new source of revenue. A supplier chosen for that purpose was certainly sourced strategically.

Identifying suppliers who can take on partnership or alliance responsibilities is daunting. Those who sign up the right partners, however, are setting up the potential for sharing enormous dividends. Workable relationships involve a willingness to share risks and build new business models with partners. When a purchasing and supply organization attempts breakthrough innovation for marketplace advantage, it is critical for partners to share common goals. Prospects for successful change are as dependent on the lead organization as on its supplier partners. New collaborative partnerships are partnerships of equals. Supplier partners that fail to move the innovation curve will ultimately be replaced with partners who do.

Beyond strategic sourcing, those who are willing to move away from traditional operating modes soon learn an important lesson: Building relationships inside and outside the organization is an ongoing process.

"We do everything by the book in terms of sourcing, but we are still focused on the old procurement world," groaned one procurement professional recently. "We still lack the skills to trust our suppliers and to build the kind of relationship where there is give-and-take and where new ideas flow." For the organization that can create supply advantage - that can build the necessary relationships and get ideas flowing - the rewards will include competitive advantage as well as the opportunity to see competitors like this one only in its rearview mirror.