Strategic sourcing in supply chain is a standardized and systematic approach to supply chain management that formalizes the way information is gathered and used. Strategic sourcing enables organizations to leverage their consolidated purchasing power to find the best possible value in the marketplace.

Procurement is the corporate function that has governance over purchasing decisions for a company. Activities of the procurement function include strategic vendor evaluation and selection, competitive bidding, contract negotiation and purchasing. Effective procurement practices enable organizations to reduce costs and maximize value.

Procurement organizations must design and implement strategies that balance C-level pressures for optimizing costs with new business imperatives such as responsible sourcing, addressing supplier risk and strengthening supply network resilience.

According to a Gartner procurement report, the procurement function is impacted by several challenges associated with business disruption including increased competition, aggressive pricing, rapidly changing technologies and new regulations. The procurement leader must ensure supply chain costs are optimized while balancing the reliability of supply, supporting social and corporate responsibilities, and mitigating risks.

Supplier risk management is the ability to assess and monitor supplier risk by tracking supplier financial performance, geopolitical risks, news sentiments, judicial filings and regulatory compliance.

Supplier risk management has been an area of underinvestment in many sourcing and procurement functions. Most companies lack competitive and dynamic supplier risk management capabilities. A reactive approach to vulnerabilities means that emerging risks and opportunities often get missed.

Turn to Gartner for help minimizing operational supply disruptions. We offer trend sensing data to help you anticipate risk events further in advance and respond faster when problems arise. We also study how winning sourcing and procurement leaders foster resilience in the supplier network, and then we share best practices with our client base.

Category strategies too often look and feel like execution plans, not strategies. It’s not surprising then that sourcing activity inconsistently yields desired business value, and that cost optimization efforts frequently become cost reduction initiatives. Gartner is committed to supporting sourcing and procurement leaders with category management: We offer insights, tools and advice for driving sourcing discipline across your business, which in turn drives supplier ROI.

It’s difficult to define and measure the impact of responsible sourcing and supplier diversity initiatives. And no wonder, since only 13% of sourcing and procurement leaders excel at identifying and onboarding diverse suppliers, and only 26% have embedded and supported supplier diversity in their organizational culture. These trends must change, and fast: The year-over-year retention rate of diverse suppliers is just 54%.

Gartner advisors can coach you in building strong relationships with a diverse supplier portfolio and ingraining responsible sourcing and supplier diversity into organizational culture. We work with companies regarded highly for their responsible sourcing and supplier diversity success, and then we document their best practices so that other organizations can adapt.

Managing supplier risk, responsible sourcing and digital transformation are key principles for procurement organizations looking to improve and innovate operations.

It’s critical that sourcing and procurement serve as a value generator for the organization, but the pace of change today makes this exceedingly difficult. It’s especially hard to develop sourcing and procurement staff capabilities at pace and evolve organizational structure.

But sourcing and procurement leaders are driven to improve: 96% say that staff will have to significantly improve their effectiveness at using digital technology to succeed in their role, and 81% indicate that adapting organizational structures to business digitalization is an urgent issue in their strategic plan.

Gartner helps sourcing and procurement clients sustain progress on their journey as a trusted advisor to the business. We provide the tools and guidance that sourcing and procurement leaders need to build their teams’ digital-capable skill set, and we enable sourcing and procurement teams to deliver business value in everyday work.