Understanding the Spend Category

Understanding the Spend Category

Strategic sourcing can be defined as a collective and organised approach to supply chain management that defines the way information is gathered and used so that an organisation can leverage its consolidated purchasing power to find the best possible values in the marketplace.
We cannot build up the significance of operating in a collaborative manner. Several decades have witnessed a major transformation in the profession of the supply chain, from the purchasing agent comprehension, where staying in the repository was the criterion, to emerging into a supply chain management surrounding, where working with cross functional and cross-location teams are important, to achieve success.Image result for Understanding the Spend Category in SCM
Strategic sourcing is organised because of the necessity of some methodology or process. It is collective because one of the essential necessities for any successful strategic sourcing attempt is of receiving operational components, apart from the procurement, engaged in the decision-making and assessment process.
The process of strategic processing is a step by step approach. There are seven distinct steps engaged in the process of strategic processing. These steps are explained below in brief.

Understanding the Spend Category

The first three steps involved in the strategic sourcing are carried out by the sourcing team. In this first stage, the team needs to do a complete survey on the total expenditure. The team ensures that it acknowledges every aspect regarding the spend category itself.
The five major regions that are analysed in the first stage are as follows:
• Complete previous expenditure records and volumes.
• Expenditures divided by items and sub-items.
• Expenditures by division, department or user.
• Expenditures by the supplier.
• Future demand projections or budgets.
For example, if the classification is grooved packaging at a customer goods company, the team has to acknowledge the description of the classification, application patterns and the reason behind specification of particular types and grades specified.
Stakeholders at all functioning units and physical locations are to be determined. The logistics, for instance, needs an updated report regarding the transportation specifications and marketing requirements to acknowledge some quality or environmentally applicable features.