AFLA Conference Archives-Speaking the Procurement Language

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The shift from traditional purchasing to strategic sourcing began in the early 1990s under the leadership of Jack Smith at General Motors. Smith and Inaki Lopez introduced a revolutionary approach that empowered purchasing leaders to form multifunctional teams, allowing GM to cut costs significantly. This process, branded as strategic sourcing, soon spread to other corporations like Sears, Honda, and FedEx, consistently delivering initial savings of around 10%, with a sustained 2-3% thereafter.<br /><br />Despite initial resistance due to concerns over supply chain reliability and supplier relationships, the compelling financial outcomes won over skeptics. Strategic sourcing has since become ingrained in corporate practices, with companies emphasizing category, supplier, and team excellence.<br /><br />Executing this strategy requires understanding and navigating the detailed, multi-step strategic sourcing process, typically involving internal and market assessments and data collection before making procurement decisions. Effective leadership without direct authority in multifunctional teams is crucial, ensuring alignment with corporate goals and leveraging expertise, relationships, and processes to achieve cost reductions and efficiency improvements.<br /><br />Continual education and informed leadership within teams help maintain focus on balancing cost savings with service quality, ensuring strategic actions align with the enterprise’s best interests, thus mastering the procurement system rather than being managed by it.

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Bran Bluestein
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Location San Diego, CA

Year 2016

Keywords

strategic sourcing

General Motors

multifunctional teams

cost reduction

procurement

supply chain

leadership

corporate strategy

San Diego, CA

2016