Strategic Sourcing Report
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Strategic Sourcing 1
Strategic Sourcing Report
Student’s Name
Institution
Date
Strategic Sourcing 2
Introduction
In the modern complex business environment, how a company buys what it needs and
manages its expenses is vital for its success. This report focuses on Palliser, a Canadian company
that has been making personalized furniture for homes since 1944. Palliser has a rich history of
creating high-quality furniture that meets the unique needs of its customers. To keep doing this
well, Palliser needs to be smart about how it buys the materials it uses in its furniture. This
reports attempts to answer three main questions. First, the report will look at the different kinds
of things Palliser buys and figure out which ones are really important and which ones are not so
important. Next, it will explain why each of these things fall into different categories. Finally, it
will explain how Palliser can make better choices when it comes to buying these things, so they
can save money and keep making great furniture. By answering these three question the report
will help us understand how buying things is crucial in making a supply chain work well and
also to manage costs when making decisions about what to buy.
Portfolio Analysis of Product Categories
This section examines Palliser's product categories to better understand their significance
in the company's operations. This analysis is essential for shaping an effective sourcing and
procurement strategy. We have categorized these product categories into three distinct groups
based on their spending levels and strategic importance.
a)
Wood and wood products
b)
Glues and adhesives
c)
High-density foam
d)
Fabric
Strategic Sourcing 3
e)
Leather
f)
LED lights and lighting accessories
g)
Power motion furniture hardware, plug, and batteries
h)
Fasteners
The Spend Map
High Strategic Importance
Low Strategic Importance
High Spend
Fabric, Leather
Wood and wood products
High density Foam
Low Spend
Power Motion Furniture hardware,
plug, and batteries
Glues and Adhesives
LED lights and Lighting accessories
Fastener
High Spend, High Strategic Importance Categories
These categories, which include wood and wood products, high-density foam, fabric, and leather,
are the ones where Palliser allocates a significant portion of its budget. Moreover, these
categories are strategically crucial to the company's business model. For instance, wood and
foam are vital for the structural integrity and comfort of furniture. Fabric and leather are essential
for customization and aesthetics. Therefore, these categories require a comprehensive strategy to
ensure quality and reliability.
Low Spend, Low Strategic Importance Categories
In contrast, the categories of glues and adhesives, LED lights and lighting accessories, and
fasteners represent lower spending and relatively lower strategic importance. These items are
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Strategic Sourcing 4
considered more generic and widely available in the market. While they are necessary for
manufacturing, they do not require a substantial budget allocation or specialized sourcing
strategies (Grilli & Webb, 2023).
Low Spend, High Strategic Importance Category
The final category holds power motion furniture hardware, plug, and batteries. Despite its
relatively low spending compared to the high spend categories, it holds significant strategic
importance. This is because this hardware is custom-made for Palliser's products and plays a
crucial role in the functionality of their furniture. However, due to its unique nature, it is only
available from one supplier, making it essential to manage strategically.
Justification for Spend Category Placement
Product Category
Spend Category
Justification
a) Wood and wood
products
High Spend, High
Strategic
Importance
Wood and wood products are essential materials in
furniture manufacturing, constituting a significant
portion of Palliser's production costs. They are
strategically important due to their role in product
quality and customization.
b) Glues and
adhesives
Low Spend, Low
Strategic
Importance
Glues and adhesives, while important for
manufacturing, are generic products widely available
from multiple suppliers. They do not require significant
spending, and their availability makes them less
strategically critical.
c) High-density
foam
High Spend, High
Strategic
Importance
High-density foam is a crucial component in furniture
upholstery, impacting comfort and quality. It is
strategically important as it directly influences product
Strategic Sourcing 5
features and customer satisfaction.
d) Fabric
High Spend, High
Strategic
Importance
Fabric selection is vital for customization and aesthetics
in home furnishings. Palliser utilizes multiple suppliers
for variety, resulting in higher spending. It is
strategically significant for product differentiation.
e) Leather
High Spend, High
Strategic
Importance
Leather is a premium material in furniture
manufacturing. It demands high spending due to quality
requirements and customization options. It is
strategically vital for luxury offerings.
f) LED lights and
lighting accessories
Low Spend, Low
Strategic
Importance
LED lights and accessories, while used in furniture, are
relatively low in spending and are not strategically
critical as they are generic products with multiple
suppliers.
g) Power motion
furniture hardware,
plug, and batteries
Low Spend, High
Strategic
Importance
This custom-made hardware is essential for Palliser's
products, but its low spending compared to other
categories is due to its unique nature. It is strategically
crucial for product functionality.
h) Fasteners
Low Spend, Low
Strategic
Importance
Fasteners are generic and readily available from various
suppliers. They do not demand significant spending and
are not strategically vital for Palliser's products.
Sourcing Strategies for Spend Categories
High Spend, High Strategic Importance Categories
In this category, Palliser's priority is to maintain the highest quality materials while
managing costs effectively. For wood and wood products, Palliser should consider negotiating
Strategic Sourcing 6
long-term contracts with trusted suppliers, leveraging their purchasing power to secure volume
discounts. Building strong relationships with these suppliers is important to ensure deliveries are
on time, quality control, and customization options. Supply chain risks should be mitigated by
diversifying the supplier base and closely monitoring market fluctuations, especially given the
strategic importance of these materials (Grilli & Webb, 2023). Investing in inventory
management technology can optimize stock levels and reduce carrying costs. Sustainability
should also be a focus, with an emphasis on sourcing certified sustainable wood to align with
environmental goals.
Also, for high-density foam, fabric, and leather, Palliser should employ cost reduction
strategies, such as long-term contracts and volume discounts, while maintaining close supplier
relationships. Given the strategic significance of these materials for customization and quality,
supplier development is crucial to ensure consistent quality and customization capabilities (Keith
et al., 2015). Diversifying suppliers and monitoring market dynamics remain important to
manage supply chain risks. Technology utilization, including inventory management systems,
can optimize stock levels for these materials. Sustainability efforts should continue with eco-
friendly fabric and leather options. Collaboration with suppliers on innovative materials and
designs is key to staying competitive and meeting evolving customer preferences.
Low Spend, High Strategic Importance Category
Palliser should adopt a strategic approach that revolves around cost efficiency, reliability,
and innovation. To optimize costs, Palliser should negotiate favorable terms with its sole
supplier, recognizing that even in lower spending categories, good cost management is essential.
Close collaboration with the single supplier is emphasized to ensure a seamless flow of high-
quality components. This close relationship facilitates timely deliveries and the ability to
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customize hardware as per Palliser's unique requirements. Additionally, it is important to keep an
eye on supplier performance, with regular monitoring and the readiness to explore alternative
suppliers if necessary (Grilli & Webb, 2023).
Low Spend, Low Strategic Importance Categories
Palliser's focus should revolve around cost efficiency and reliability. Consolidating
purchases with trusted suppliers can result in cost reductions through economies of scale.
Maintaining relationships with reliable local suppliers is essential to ensure a consistent supply
of these generic but necessary materials. While these categories may not be strategically vital, it
is good to have backup suppliers in place to prevent production disruptions. Implementing
inventory control technology can help Palliser reduce carrying costs and streamline reordering
processes for these materials. Considering sustainable alternatives where feasible is a responsible
step, aligning with environmental goals and potentially appealing to eco-conscious consumers
(Grilli & Webb, 2023). Although innovation may not be the primary focus in these categories,
periodically evaluating new products or technologies can uncover opportunities for improved
efficiency or cost savings, even in less strategically significant areas of procurement.
Strategic Sourcing 8
References
Grilli, B. A., & Webb, T. G. (2023). Strategic sourcing.
Strategic Sourcing in the Public Sector
,
13-33.
https://doi.org/10.4324/9781003267287-2
Grilli, B. A., & Webb, T. G. (2023). Guidelines for strategic sourcing.
Strategic Sourcing in the
Public Sector
, 35-55.
https://doi.org/10.4324/9781003267287-3
Keith, B., Vitasek, K., Manrodt, K., & Kling, J. (2015).
Strategic sourcing in the new economy:
Harnessing the potential of sourcing business models for modern procurement
. Palgrave
Macmillan.