Building an Effective Sourcing Strategy: 7 Steps Top Procurement Teams Follow
- Robert
- May 30
- 5 min read
Table of contents
In case you don't have time to read the entire article, a podcast summary is provided for you:
Top-performing companies treat sourcing as a strategic driver of business success, not just an administrative task. They use structured sourcing processes to unlock cost savings, reduce risk exposure, build stronger supplier relationships, and even drive innovation.
In this article, we’ll walk through the 7 steps of an effective sourcing strategy, explain why they matter, and share best practices you can adopt right away.
What is a Sourcing Strategy?
A sourcing strategy is a structured plan for identifying, evaluating, and engaging suppliers that can deliver the goods or services your organization needs.
It’s not the same as procurement. Procurement is about executing purchases (issuing POs, processing invoices, tracking deliveries). Sourcing is about deciding who you buy from, why, and under what terms.
Over the past decade, sourcing has shifted from a transactional focus on cost to a strategic function that integrates risk management, sustainability, innovation, and digital transformation.
Why Do You Need a Sourcing Strategy?
Without a sourcing strategy, procurement teams often:
Overpay due to a lack of competitive pressure.
Face disruptions from unreliable suppliers.
Miss opportunities for innovation and sustainability improvements.
A clear sourcing strategy delivers:
Cost savings: Structured sourcing events (like RFPs or e-auctions) typically reduce spend by 10–15% compared to manual negotiations.
Risk mitigation: Systematic supplier qualification and monitoring prevent supply chain shocks.
Innovation: Engaging the right suppliers can spark process improvements or product advancements.
Sustainability alignment: Choosing suppliers that meet ESG standards supports broader business goals.
The 7 Steps of an Effective Sourcing Strategy
Now that I’ve covered what sourcing is and how having a sourcing strategy in place can benefit companies, it’s time to focus on how you can create an effective sourcing process that best fits your business’s needs.
As global sourcing processes have matured and businesses have been implementing best practices, effective sourcing strategies have emerged. Here’s how you can create an effective sourcing process in 7 easy steps:
1. Analyze Your Spend
Every sourcing strategy begins with visibility. You can’t optimize what you can’t see.
Map your spend by category, supplier, and business unit.
Identify maverick spending (off-contract purchases) that bypasses procurement.
Use spend analytics tools to uncover patterns and consolidation opportunities.
Tip: Companies with strong spend visibility save up to 12% more annually than those without structured analytics.
2. Define Requirements & Objectives
Sourcing should align with your organization’s strategic goals. That means:
Clarifying what’s most important (lowest cost, highest quality, speed to market, ESG, innovation).
Getting stakeholders aligned early so requirements are consistent and realistic.
Enrichment: When defining requirements, don’t just look at technical and service specs - include ESG metrics such as carbon footprint, supplier diversity, and compliance requirements. Invite finance, logistics, and product experts early to estimate demand, switching costs, and potential savings. This prevents surprises later and ensures sourcing aligns with both business and sustainability goals.
3. Conduct Market Research
Before approaching suppliers, you need to understand the supply market:
Who are the qualified suppliers?
What are current market prices and trends?
What risks (financial, geopolitical, operational) affect the supplier landscape?
Benchmarking and supplier intelligence tools can help you avoid blind spots.
4. Develop a Sourcing Plan
This is where strategy becomes concrete. Decide:
Which sourcing model fits best: RFP, RFQ, reverse auction, direct negotiation, or long-term partnership.
What criteria you’ll use to evaluate suppliers (price, quality, innovation, delivery time, ESG performance).
How to balance short-term cost with long-term value.
A strong sourcing plan ensures that all stakeholders are aware of the rules of the game before the event begins.
5. Engage and Qualify Suppliers
Not all suppliers are created equal. Qualification ensures you only invite suppliers who can deliver reliably and compliantly.
Key checks include:
Financial stability and credit risk.
Compliance with certifications and regulations.
ESG standards (carbon reduction, labor practices, diversity).
Enrichment: Provide suppliers with clear, structured templates for submitting offers (pricing tables, compliance forms, mandatory vs. optional requirements). Use straightforward language to avoid cultural misunderstandings, and consider offering multilingual support for global sourcing. Keep all updates in a central platform and confirm that suppliers have received and understood therequests. Encourage suppliers to share risks and ideas; open dialogue builds trust and reduces surprises during the event.
6. Run Competitive Events
Now comes execution. Competitive sourcing events create transparency and pressure that drive better supplier offers.
Options include:
RFQs for price-focused purchases.
RFPs for more complex needs where quality, service, or innovation also matter.
Reverse e-auctions when price competition is strong (e.g., commodities or standardized services).
Digital sourcing platforms make this process faster, fairer, and more transparent. Suppliers see exactly what’s expected, and buyers can track bids in real-time.
Enrichment: Time matters in volatile markets. Use dashboards or structured reports to track progress and adjust quickly. Decide fast to lock in favorable terms, especially when market prices are shifting. And don’t forget to give feedback to all participating suppliers, even those not selected, to maintain goodwill and keep the door open for future events.
7. Negotiate and Award Contracts
The last step is about converting supplier bids into value-adding contracts.
Negotiate not only on price but also on delivery terms, payment conditions, and added value.
Focus on long-term relationships with strategic suppliers rather than short-term savings.
Clearly document service levels (SLAs) and performance metrics in contracts.
Enrichment: The relationship doesn’t end with a signed contract. Build ongoing supplier management into your sourcing strategy. Schedule regular check-ins, track performance on delivery/quality/ESG, and address issues early before they escalate. Treat key suppliers as partners for co-innovation - they often bring valuable ideas you may not have considered. Use SRM (Supplier Relationship Management) practices to strengthen collaboration and ensure continuous improvement.
Want to streamline your sourcing process?
Download our guide, 7 steps for effective sourcing.
Best Practices for Modern Sourcing
Building a sourcing strategy isn’t just about following steps. The best procurement teams embed a few core practices into everything they do:
Leverage technology: Automate data collection, supplier qualification, and sourcing events.
Collaborate cross-functionally: Align procurement, finance, operations, and sustainability goals.
Look beyond cost: Factor in risk, innovation, and ESG in supplier selection.
Stay adaptable: Use different sourcing models (RFPs, e-auctions, long-term partnerships) depending on category needs.
How Prokuria Supports Strategic Sourcing
An effective sourcing strategy needs more than process - it needs the right tools.
Prokuria helps procurement teams:
Run sourcing events (RFPs, RFQs, reverse auctions) with ease.
Automate supplier qualification and compliance tracking.
Gain visibility into spend and supplier performance with built-in analytics.
Collaborate with stakeholders on one central platform.
Ready to take your sourcing strategy to the next level? Book a free demo and see how Prokuria can help you streamline sourcing, cut costs, and build stronger supplier partnerships.
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