Distinguishing Between Tactical Sourcing and Strategic Procurement
For ensuring successful delivery of products to the customers, a company needs to plan and implement an effective procurement strategy. The efficient incorporation of this strategy makes sure that adequate supplies and items are obtained timely. When working on the sourcing strategy, several factors are to be taken into consideration like, the size of the company and the business strategy and technology currently followed by the company. Based on these aspects, you may opt for either tactical sourcing or strategic procurement. Both these procurement plans have their share of advantages and challenges. In certain circumstances, tactical sourcing can prove to be the perfect sourcing model while some situations demand the implementation of strategic procurement.
If you are confused whether to select strategic procurement or choose tactical sourcing, the following differentiation between these two procurement plans will clear your confusion. Before jotting down the disparities, let’s give you the definition of both the models.
What is strategic procurement?
Strategic sourcing is a long-term meticulous pattern followed by maximum large-scale organizations to cater to their current as well as the future requirements. It generates least amount of risk to the supply line. Firms implementing this procurement strategy fulfill their requirements at the lowest TCO or total cost of ownership.
What is tactical sourcing?
Tactical sourcing is implemented by most mid-level and small-sized companies. It takes day-to-day decisions on buying raw materials or products. Companies embracing this procurement model follow a prompt estimate and order process for a quick production and delivery of end-products. The company needs to keep track that all the required supplies are available in the hour of need at reasonable prices.
Where do tactical sourcing and strategic procurement differ?
The process of strategic procurement establishes a trustworthy business relation between the suppliers and the purchasing organizations with the aim of improving the quality, cost and delivery of the supplies. Extensive market analysis, thorough selection of suppliers and precise approach to maintain long-term and amicable relations with suppliers are the major elements of strategic procurement.
In stark contrast to strategic sourcing, tactical purchasing does not require a company to devote much time in evaluating the needs of the whole firm. Also, an organization following tactical purchasing does not pay much attention when it comes to scrutinizing the capacity of a supplier to cater to its larger requirements in future.
It is commonly believed that a purchasing decision taken in a short span of time (tactical sourcing) has the high chance of going wrong and decisions related to procurement when taken with much precision end up being successful. But, many medium and small firms have succeeded with tactical sourcing. It is a fact that most medium-sized and small-scale companies do not have the sufficient resources and adequate time to consider an extensive procurement plan like strategic sourcing. The chief goal of these firms is to make sure that the manufacturing process operates without any difficulty. So, tactical sourcing becomes the perfect choice for such companies.
On the flip side, large-scale companies have the right ERP platform, the most appropriate skill-sets and in short, the right resources to dedicate enough time to execute a strategic procurement plan.
Therefore, examine your organizational requirements and choose the most suitable procurement strategy among tactical sourcing and strategic procurement.