Strategic sourcing is a comprehensive approach to identifying, selecting and managing suppliers of raw materials or services. The focus isn’t just on price, but also on the supplier's overall value, including its quality, reliability and commitment to innovation. The process requires a procurement strategy that aligns with the organization's larger goals, involving market research to identify potential suppliers, evaluate them based on capabilities and performance, negotiate contracts and manage supplier relationships.

Strategic sourcing aims to create long-term value by optimizing the procurement process. It’s a continuous effort that requires ongoing monitoring and analysis of supplier performance and market trends, to ensure that the buying organization is meeting customer needs for cost and quality.

Often companies will have multiple tiers of suppliers to mitigate the risk of supply chain disruptions. If a top-tier supplier can’t deliver a product, having alternative suppliers ensures continuity of supply. Multiple tiers of suppliers can provide greater flexibility in procurement operations by enabling the buyer to ramp up production quickly.

Many small to medium-sized businesses have a single-source supplier, so when that vendor can’t fill an order, the SMB is left out in the cold. In cases where the supplier provides a critical piece of the final product, failure to deliver can damage the buyer’s customer relationships and lead to lost sales. 

Diversifying the Supplier Base

To mitigate the risks associated with reliance on a single supplier, it’s essential to have alternatives in place.

Diversifying your supplier base allows you to compare prices and service terms, which may reduce costs. By working with a broader range of suppliers, you can tap into different markets and geographies and access unique products and services, while also ensuring continuity of supply in the event of a natural disaster or geopolitical crisis in a particular region. Plus, if you rely on a single supplier that’s experiencing negative publicity, it can damage your business's reputation.

In seeking to diversify your supplier base, start by assessing your current suppliers to determine where your supply chain risks and vulnerabilities lie. This can help you identify areas where you might need additional sources of supply. Then you can begin to identify potential new vendors that offer competitive pricing, high-quality products, or have a good reputation in the industry.

Consider factors such as the supplier’s financial stability, production capacity, delivery times, quality control processes and environmental and social standards compliance. Negotiate a fair contract, monitor their performance regularly, and continuously update your supplier base. 

How a Sourcing Platform Can Help

Small businesses often lack the time and resources to research new suppliers. They can benefit from the use of a vendor-procurement platform that links to alternative sources that have already been vetted. A procurement platform, sourcing marketplace or supplier directory lists multiple tiers of suppliers in specific industries with information about their products, including side-by-side comparisons of vendors with ratings and customer reviews.

Social media platforms such as LinkedIn, Twitter and Facebook can be another effective tool for finding and connecting with new suppliers.

The key to finding new sources of products is to be proactive and strategic in the search for suppliers. By utilizing a vendor marketplace, you can provide more value to your customers by being able to fulfill their orders consistently.

Sam Polakoff is founder and chief executive officer of BrillDog.