STRATEGIC SOURCING: THE STRATEGIC TRANSFORMATION OF BUYER COMPANIES – PART 1

The development of the Purchasing/Supply activity in the purchasing companies went through different stages towards greater sophistication in the sector. The first stage was characterized by little value added by the department responsible for purchasing goods and services in organizations. In this phase, the internal requesters carried out almost all activities associated with the procurement negotiation, leaving the Purchasing or Supplies sector only to carry out the transaction, consisting of issuing the purchase order, monitoring delivery and writing contracts whose clauses were previously agreements between the requesting internal sector and the supplier.

In the second stage, acquisitions started to be conducted entirely by the Purchasing or Procurement department. Communications with other departments and users began to be encouraged for a better understanding of internal customer needs. At this stage, the concern with cost reduction begins to emerge, both for the buyer and the seller, providing initiatives to streamline the quotation process, optimization of the logistical flow, commitment of the orders placed with the supplier and advance information to the suppliers about forecasts of the needs of goods and services.

The third phase is marked by greater participation of the internal customer in the acquisitions made, ensuring that all technical aspects and the total cost of ownership were properly considered. Still in this phase, the Purchasing or Supplies sector started the practice of supporting the company's competitive strategy through the adoption of techniques, methods and activities that offered strengthening of the company's competitive position.

In the fourth and last stage, Purchasing or Supplies were fully integrated with the company's competitive strategy, with the real characterization of its strategic role in the organization. Purchasing becomes part of a joint effort with the other related functions to formulate and implement a strategic plan at the departmental level arising from the company's strategy, in addition to, also together with the other functions, influencing the formulation of the company's strategy in a reciprocal relationship . In other words, the activities and strategies defined for the Purchasing or Supplies function seek to support the company's competitive strategy and, at the same time, be derived from it.

The emergence of strategic sourcing seems to have happened in the second half of the third stage described above and emerged as a mechanism for implementing strategic concepts, paving the way for the last stage of structural development of the Purchasing/Supply sector in organizations.

This text, divided into two parts, will draw an overview of the strategic sourcing methodology, showing its level of implementation in Brazilian companies, the maturity of this practice, reasons for its use and reasons for not using it, and, when possible, will compare the environment Brazilian with other scenarios abroad.

2. DEFINITION OF THE STRATEGIC SOURCING CONCEPT

In the literature on the subject, there is still no consensus among authors on a standardized definition of what strategic sourcing would be. The two perspectives presented below seek to fill this gap.
Looking at a more simplistic side, we can say that strategic sourcing can be understood as a strategic purchasing/supply process that aims to identify the suppliers that offer the best benefits to the purchasing organization and the establishment of different relationship strategies with these suppliers. .

On the other hand, it can also be said that strategic sourcing is represented by the interaction of the two macro processes configured in Figure 1.

The right side of Figure 1 indicates that sourcing has a large interaction with the supplier market and concerns every activity that provides intelligence to the purchasing process. Through sourcing, the study groups of the various items evaluate the supplier market in depth, segment these items into categories, establish purchasing strategies, contribute to the selection of their suppliers and establish the characteristics of managing the relationship with them.

The procurement side of Figure 1, on the other hand, deals with traditional Purchasing issues through the exercise of daily activities of coordination of requests received from internal customers, elaboration and administration of contracts, follow-up of orders placed with suppliers and their management.

In practice, strategic sourcing is the combination of the two sides of the picture, where sourcing intelligence creates conditions for better performance of procurement activities. This configuration invites executives to stop thinking in terms of meeting their company's immediate needs and encourages purchasing goods and services from a long-term perspective, considering all the factors involved in business decisions. In this way, different options are created and analyzed in a holistic perspective.

3. USE OF STRATEGIC SOURCING IN BRAZILIAN COMPANIES

There are many benefits obtained with the implementation of this methodology. The list of advantages achieved with the experiences of companies that restructured their purchasing departments, as shown in Figure 1, includes achievements such as those mentioned below:

• Cost reduction in purchased products and services, witnessed by many companies that managed to obtain up to two-digit average reductions in the cost of these items;

• Standardization of processes due to the formalization of routines, which are now documented;

• Reduction of the service cycle time for requests from internal customers;

• Greater use of multifunctional teams, allowing the participation of the organization's sectors in the decision-making process of Supplies;

• Greater knowledge of the supplier market;

• Quality improvement;

• Access to cutting-edge technology;

• Improved delivery times for suppliers;

• Increased availability when there is a supply shortage;

• Rationalization of the supplier base;• Improvement in the internal and external relationship of the Purchasing sector of the organizations. In the internal segment, through greater integration with other sectors, and, in the external environment, through better communication and understanding with suppliers. benefits listed above, the ILOS Institute carried out an extensive survey among a large group of companies located in Brazil, containing the characteristics described below.

The research used the universe of companies classified among the thousand largest and best companies, published in Exame magazine. This universe resulted in a sample of 95 organizations that decided to participate in the research and that answered the questionnaire, a number considered valid to support the statistical analyses.

The average revenue of the companies in the sample was BRL 3,5 billion and they belonged to 15 different sectors of the economy, as described below:

• Agribusiness;

• Food and drinks;

• Automotive and Auto Parts;

• Retail business;

• Construction and Engineering;

• Pharmaceutical, Hygiene, Cosmetics and Cleaning;

• Machines and equipment;

• Construction material;

• Mining;

• Paper And Cellulose;

• Chemical and Petrochemical;

• Services;

• Technology and Telecommunications;

• Textiles, Leather and Clothing.

The question that caught the author's attention was the one aimed at investigating whether or not companies use strategic sourcing. The result found was that 46% of respondents do not use this strategic process of acquiring goods and services. It is interesting to note that this result is very similar to that found two years earlier, when – in another survey by the ILOS institute, designed to draw an overview of Purchasing & Supplies management in Brazil – it was concluded that, on average, half of the companies installed in the country did not use strategic sourcing.

When trying to understand which sectors use this methodology with greater or lesser intensity, the result is that segments of the economy such as Machinery and Equipment; Pharmaceuticals, Hygiene, Cosmetics; Metallurgy and Siderurgy; Pulp and Paper and the Automotive and Auto Parts sector have high levels of use. On the other hand, sectors such as Agribusiness and Food and Beverage show indices that are not very expressive, indicating that they still have companies that are pulling the average down and that, therefore, have a long way to go in the direction of greater sophistication in the processes of acquiring goods and services. See full picture in Figure 2.

Continuing with the observations presented, we can deepen our analysis by looking at the set of companies that use the methodology, seeking to investigate the maturity of the strategic sourcing processes implemented until then. The chart outlined in Figure 3 allows us to make some interesting observations – few sectors, that is, 16% of the total sample that uses the methodology, are in the range of more than five years of employment in this way of proceeding with their acquisitions. Almost 50% have less time of use, positioning themselves in the average of two years. This panorama reflects the little experience of Brazilian companies in using the methodology when compared with other countries, as we will see later.

Figure 4 depicts the result of research conducted in the following countries: Austria, Belgium, Croatia, Czech Republic, Denmark, England, Estonia, Finland, France, Germany, Greece, Hungary, India, Iran, Ireland, Israel, Italy, Kenya, Netherlands, Nigeria, Poland, Romania, Russia, Saudi Arabia, Slovakia, South Africa, Spain, Switzerland, Sweden, Turkey and United Arab Emirates, totaling 230 companies interviewed, in which 72% of the sample claimed to have a formalized strategic sourcing program and operating normally. 8% of the sample stated that everything was ready for the program to start running in twelve months from the date of the survey. Thus, only 20% of the total sample does not have any strategic sourcing initiative, which is quite different from the number found in the Brazilian survey.

Taking as a reference only those companies that have the methodology, it was observed that 36% have been using it for more than five years and another 36% are in the range between two and five years of use.

When we compare the numbers recorded in Figures 3 and 4, we conclude that strategic sourcing initiatives in Brazil are still recent and with little intensity. In the second part of this article, the author investigates the possible reasons for this scenario.

4. CONCLUSION

Up to this point in the development of this first part of the article, it is possible to summarize some conclusions about the universe of companies that adopt strategic sourcing and their level of maturity.

The ILOS survey showed that about half of the largest Brazilian companies still do not adopt this methodology in their processes for obtaining goods and services and most of those that have already implemented this initiative started just over two years ago. This reflects the large space that still exists for carrying out the transformation process of our companies, having as a milestone the introduction of an initiative that places the Purchasing/Supplies sector in a strategic position within organizations.

The second part of this article will address the reasons that lead companies to employ strategic sourcing and the reasons given by companies that do not use it.