6 min read
If you’re new to procurement, the key to strategic sourcing is simple: plan before you buy. Too many business decision makers and budget owners jump into supplier negotiations without first defining what success looks like.
A structured strategic sourcing strategy helps you avoid common pitfalls and secure the best long-term outcomes. In this article I share some of my favorite tips from step three of the seven-step strategic sourcing plan I developed over a decade as a procurement practitioner and consultant.
If you’re interested in the bigger picture, you can revisit steps one and two in the links at the end of this article (or listen to many of our podcasts on the topic!).
How to develop a sourcing strategy that works for all stakeholders
If you follow my 7 step strategic sourcing plan you’ll already know that sourcing isn’t just about getting the best price. It’s about value—balancing cost, supplier relationships, and risk to support your business’s broader objectives.
Step three is where we turn insights into action. At this stage, you should already have a clear category profile, including spend data, market intelligence, and assessed supplier capabilities. Now, it’s time to define a baseline, identify internal changes, map the procurement flow, and build a category strategy that supports your business goals.
Tip 1: Define your baseline
One of the hardest parts of developing a sourcing strategy is getting an accurate baseline—understanding what you’re currently spending, how much you’re buying, and from whom. Without a clear baseline, how can you measure improvement?
The biggest challenge here isn’t a lack of data—it is making sense of the data that you have. Procurement teams often struggle with fragmented spend data, inconsistent reporting, and difficulty accessing historical spend and supplier information.
How to get your baseline right
- Start with internal spend data – Gather what’s available from finance, ERP systems, and procurement tools. Look at supplier contracts, purchase orders, and invoices to build a complete picture.
- Explore spend analysis solutions - These days there are many software and service solutions to help you with spend analysis. Look for a best-fit solution for your needs, so you can avoid spending time and resources on repetitive data crunching.
- Leverage your suppliers – If internal data is messy or incomplete, don’t be afraid to ask suppliers for insights. They can provide historical purchasing data that gives you a better sense of your actual spend.
- Project future demand carefully – Work with business stakeholders to forecast future needs. If you’re unsure, be conservative or request proposals that account for different volume scenarios. It’s better to negotiate flexibility upfront than to lock in a deal that doesn’t work for you or your suppliers.
A well-defined baseline doesn’t just help with analysis and sourcing plans. It ensures you enter any supplier negotiations from a position of data-driven strength.
Tip 2: Define internal change tactics
Developing a sourcing strategy isn’t just about picking suppliers—it’s about making sure your internal processes and priorities support the strategy you’re putting in place. Too often, procurement teams focus on external factors—pricing, suppliers, market conditions—without considering the internal changes needed for success. But if procurement isn’t aligned with business goals, even the best sourcing strategy will fall short.
Start with business goals, not just cost savings
One of the biggest mistakes procurement teams make is assuming that savings should be the primary focus of every sourcing event. But what if the business values supplier innovation or long-term stability more than short-term cost reduction?
Before defining your sourcing approach, take a step back and ask:
- What is the business trying to achieve? Is the priority cost reduction, or are other factors—like risk management, sustainability, or operational efficiency—more important?
- Are procurement’s goals aligned with those of business stakeholders? If not, where do potential conflicts exist?
- Does the company’s current procurement process support these goals? Or do internal inefficiencies need to be addressed first?
Successful procurement teams don’t just execute sourcing events—they shape business decisions and outcomes by ensuring that procurement strategy aligns with broader company objectives.
Have the confidence to challenge misalignment
Aligning with business goals doesn’t mean saying yes to everything stakeholders ask for. Procurement must be a strategic advisor, not just an order taker. That means being willing to push back when stakeholder requests don’t align with the bigger picture.
For example:
- A stakeholder might have a strong personal preference for a supplier that influences any objective comparisons. Procurement’s job is to ensure a fair and competitive playing field.
- A stakeholder might want a niche supplier that doesn’t meet the company’s risk requirements. Procurement should step in and challenge the decision.
- A business unit might be focused on a short-term cost reduction strategy, even if a slightly higher upfront investment would lead to greater long-term value. Procurement needs to quantify and explain the bigger picture.
Engage stakeholders early to avoid misalignment later
Stakeholder engagement isn’t just a box to check—it’s an essential part of developing a sourcing strategy that actually works. If procurement teams fail to involve stakeholders in the early stages, misalignment can surface later in the process, causing delays, supplier conflicts, or last-minute changes that weaken negotiation leverage.
Here’s how to avoid those pitfalls:
- Bring stakeholders into the process early. Make sure they understand procurement’s role and are aligned on key goals before engaging suppliers.
- Define supplier selection criteria together. Agree on the factors that matter most—price, quality, innovation, risk, or something else—before reaching out to suppliers.
- Set expectations around communication. Ensure stakeholders understand how procurement will engage suppliers and what role they will play in the process.
When procurement and business stakeholders are aligned from the start, sourcing strategies are more efficient, more effective, and more likely to deliver the right results.
Tip 3: Map the desired procurement flow
Once you’ve established a baseline and identified the internal changes needed, the next step is to map the “to-be” or desired procurement flow. This is where you design how sourcing should work going forward, eliminating inefficiencies and aligning with business goals.
Too often, procurement teams default to running sourcing events the way they’ve always been done. But if the process is clunky, reactive, or lacks clear decision-making objectives, you risk losing opportunities for real impact - or burning your internal stakeholder relationships.
Mapping the future procurement flow helps you visualize:
- How procurement engages stakeholders and suppliers
- Where decision points and approvals should happen
- How to introduce automation or standardization to streamline the process
- How supplier selection, negotiations, and contracting should be structured
A well-designed procurement flow isn’t just about efficiency—it reduces friction with stakeholders and makes it easier to execute sourcing events successfully. It also ensures that procurement isn’t just responding to demand but shaping how the organization buys strategically.
How to make processes flow
- Identify the bottlenecks. Look at past sourcing events and pinpoint where delays, confusion, or inefficiencies happened. Was it a lack of clear supplier evaluation criteria? Did stakeholder approvals take too long? Address these gaps in your future process.
- Define key decision points. Make it clear who is responsible for what at each stage of the sourcing process. Procurement, finance, and business stakeholders all play a role—mapping out decision points up front prevents confusion later.
- Align with technology. Can supplier discovery, bid evaluation, or contract management be automated? The right tools reduce manual effort and improve visibility. For inspiration, visit the Art of Procurement Provider Directory.
- Keep it flexible. A good procurement process isn’t rigid—it adapts to different sourcing needs and market conditions. Make sure your strategy can support both highly structured RFPs and more agile supplier negotiations when needed.
By the time you finish this step, procurement should have a clear blueprint for how sourcing should work, not just how it’s been done in the past.
Tip 4: Determine category strategy
Category strategy is where procurement moves beyond individual sourcing events and looks at the bigger picture. Instead of treating each supplier engagement as a one-time transaction, category strategy ensures that procurement is managing suppliers and spend holistically over the long term.
Procurement’s historic tendency was to focus on cost savings at the expense of long-term supplier value. A good category strategy balances savings with supplier innovation, risk management, and business alignment.
Four key pillars of a strong category strategy
- Clear scope and specifications
Procurement must either define precise requirements or create an open-ended request for suppliers to propose solutions. Without this clarity, sourcing efforts can become disorganized and misaligned with business needs. - Data-driven decision-making
Spend analytics and market intelligence should guide supplier selection, negotiations, and risk assessments. Procurement teams that rely on gut feel rather than data miss opportunities for better pricing and service levels. - Risk management from the start
Risk isn’t something to think about after selecting a supplier—it needs to be part of category strategy from the beginning. Supplier risk assessments, financial stability checks, and contingency planning all help reduce disruption. - Stakeholder engagement
Category strategy must be aligned with the broader business. Stakeholders should be involved from the outset, ensuring procurement priorities don’t conflict with operational needs. Procurement should also control messaging to suppliers so they receive a unified, consistent message.
A strong category strategy ensures that procurement isn’t just focused on short-term wins but is aligned with key stakeholders, building supplier relationships and cost management strategies that will hold up over time. Also, don’t forget to assess risk factors. A strong sourcing strategy identifies potential risks—supplier dependency, financial instability, geopolitical factors—before they become a problem.
Bringing it all together in your sourcing strategy
Developing a sourcing strategy isn’t just a step in the process—it’s what sets procurement up for success. If you don’t define your baseline, identify the right internal changes, map your procurement flow, and build a strong category strategy, you risk running a sourcing event that misses the mark.
The key takeaways:
- A strong baseline ensures you have accurate data to drive decisions
- Internal change tactics ensure procurement is aligned with business needs
- Mapping the procurement flow reduces inefficiencies and improves execution
- Category strategy ensures long-term supplier relationships and risk management
If procurement teams treat strategy as a box to check rather than an opportunity to drive value, they’ll keep running into the same challenges. The best sourcing professionals know that this step, done right, lays the foundation for long-term success.
Related articles and resources:
- Strategic Sourcing, Explained for Beginners
- How to Start a Strategic Sourcing Process (with My Proven 7-Step Plan)
- How to Create a Category Profile for Strategic Sourcing
- How to Build A Strategic Sourcing Strategy (that Goes Beyond Category and Supplier Management)
- Learn How Google’s Strategic Sourcing Team Became a Trusted Business Partner, with Tim Jones of Google.
