Commodity sourcing strategies: processes, best practices, and defense initiatives

Abstract

This research discusses the transformation occurring in the procurement and purchasing function, specifically as it applies to developing procurement strategies and the implementation of commodity strategies as an application of strategic sourcing. The literature review presents the theoretical framework surrounding the transformation of purchasing to supply management along with its major developments such as integrated supplier relationships, total ownership costs, cross-functional teams, supply chains, e-procurement systems and strategic sourcing strategies. Strategic sourcing and developing sourcing strategies are discussed, and commodity sourcing strategies are also discussed in conjunction with Lasseter's seven-step process for developing commodity sourcing strategies. The application of strategic sourcing in the commercial sector is discussed using examples from industry, along with applications within the Department of Defense (DoD). Some challenges to strategic sourcing identified in the research include access to the required spend data, highly fragmented supply base, and government procurement goals. The research also identifies best practices sich as establishing common processes and tools, using cross-functional teams, ensuring adequate team sponsorship and authority, and aggressively managing purchasing requirements.