Tim Murphy
In a period from the late 1990s through early 2020, sourcing became the dominant tool for most procurement professionals. We reached for sourcing to drive savings, consolidate supplier bases, and obtain service improvements. Sourcing was so successful that in may ways it outcompeted other procurement tools and replaced them. This was possible because sourcing was such a great fit for the market conditions that existed during this period – predicable pricing, available supply, and reliable delivery. Under these conditions, strategic sourcing enabled procurement organizations to extract the greatest value from their supplier relationships.
There is nothing fundamentally wrong with any of this. Procurement organizations had leverage and they used strategic sourcing to capitalize on that leverage and accrue value for their organizations. I imaging that strategic sourcing would have continued to be the dominant procurement tool and drive market efficiencies if market conditions had remained static, but they didn’t.
The problem isn’t that sourcing fundamentally lost its effectiveness, but that the market ecosystem changed. The global COVID pandemic changed markets so pricing became unpredictable, there were regular supply shortages, and delivery was chaotic. In this market, strategic sourcing was a poor fit to achieve positive outcomes. Leverage rapidly shifted from buyers to sellers and many procurement organizations struggled to find procurement tools that would yield positive outcomes in the new environment.
The disruptions of the pandemic are largely behind us, but the scars it left are still fresh for procurement professionals and supplier executives. Today, procurement professionals need to expand their toolkits, dusting off old tools and learning new skills to rebuild supplier networks damaged by the constant application of sourcing and disrupted by the pandemic. To achieve success today and through then next crisis, we all need a diversified procurement toolkit.
Learn more about our perspective on diversifying procurement tools in our recent white paper.