Tactical Sourcing

As procurement practices evolve, organizations are leveraging data to identify and address inefficiencies in their sourcing processes. Many companies are prioritizing the management of tail spend – unmanaged or off-book purchasing that can significantly impact a company’s bottom line.

Tactical sourcing serves a specific purpose in procurement, but over-reliance on this approach can hinder cost savings and create waste. It is essential to understand the role of tactical sourcing and how it fits into a comprehensive procurement strategy.

• Short-term Focus: Tactical sourcing addresses immediate procurement needs without necessarily considering long-term impacts.
• Speed: The process prioritizes quick turnaround times for purchasing decisions.
• Transactional Nature: It involves routine, often reactive purchasing methods to address current business requirements.
• Limited Supplier Collaboration: It typically involves less collaboration with suppliers compared to strategic sourcing approaches.

Advantages

• Agility: It allows businesses to respond quickly to unexpected needs or supply chain issues.
• Targeted Approach: Buyers can secure specific products from selected vendors without extensive research on alternatives.
• Increased Compliance: Self-service tools can improve adherence to procurement policies.
• Cost Savings: In some cases, it can lead to immediate cost reductions.

Disadvantages

• Limited Market Research: The approach often bypasses thorough market analysis to find the best possible vendors.
• Minimal Relationship Management: The reactive nature is not conducive to building strong supplier relationships.
• Missed Opportunities: Reliance on tactical sourcing may result in overlooking chances to negotiate better contracts or improve strategic processes.
• Short-term Focus: It may not align with broader business strategies or long-term objectives.

 Tactical sourcing is appropriate in several scenarios:

• Time Constraints: When facing tight deadlines or overlapping procurement and production schedules.
• Emergency Purchases: For addressing unexpected or urgent procurement needs.
• Non-critical Items: When dealing with purchases that do not require long-term contracts or strategic considerations.
• Addressing Rogue Spend: As an initial step to bring off-book purchases under procurement control.

While tactical sourcing has its place, organizations should aim to develop a procurement process that combines the advantages of both tactical and strategic sourcing approaches. This hybrid strategy involves:

• Segmenting Spend: Focus strategic sourcing efforts on high-value, business-critical products or services with a high total cost of ownership (TCO).
• Leveraging Technology: Implement procurement software to streamline both strategic and tactical sourcing processes, increasing visibility and compliance.
• Balancing Approaches: Use tactical sourcing for short-term, infrequent needs while developing long-term supplier relationships for critical inputs.
• Continuous Evaluation: Regularly assess the effectiveness of sourcing strategies and adjust the balance between tactical and strategic approaches as needed.

By implementing a well-balanced sourcing strategy that incorporates both tactical and strategic elements, organizations can optimize their procurement processes, reduce costs, and build resilient supply chains that support long-term business objectives.

At Levelpath, we don’t just provide a software solution; we provide a customer commitment in the form of a partnership. Our success team is dedicated to empowering procurement with the knowledge, tools and support they need to stay curious and continually drive procurement transformation. From initial workspace setup to advanced customization and beyond, the Levelpath community is there every step of the way.

Are you ready to unlock the full potential of your procurement processes? Discover how the Levelpath platform will revolutionize the way you work. Let us build a path to success, together.