Understanding the Differences between Strategic Sourcing Goals, Objectives, and Requirements

Early in the course of a product design and manufacturing organization's strategic sourcing project it is common to have a kickoff meeting that includes the engineering team. It is the opportunity for the sourcing project team to lay the groundwork for the rest of the effort. One of the most critical discussions that should be a part of the kickoff is around the goals, objectives, and requirements for the project.

This is an effort to be taken seriously by both procurement, which should facilitate the discussion, and engineering, which provides critical inputs. Unlike a mission statement, which is often dismissed as being an overly soft (and largely meaningless) feel-good expression of early-stage enthusiasm, goals, objectives, and requirements are tools that will be used actively in the sourcing project once it reaches the decision-making stage.

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When I worked as a consultant at a procurement solutions provider, I held workshops on kickoffs for the procurement teams I coached, as part of their project management skills development. There are two tricky lessons to be learned about goals, objectives, and requirements: how to formulate them and how to tell in which category an idea belongs.

Goals

Goals are big picture and long term in nature. Although they are not measurable at a detailed level, they capture an aspirational future state that the sourcing team would like to achieve through services, materials, or some other category-in-question. Examples of sourcing-related goals include:

Although goals seem as though they would be beyond what's achievable by the project team, this is their purpose. They may be used to stimulate conversation with suppliers in the later stages of a project or to help the rest of the organization recognize how the project contributes to company-wide priorities. In fact, it is ideal if the driving ideals of the company are reflected in the goals of every sourcing project.

Objectives

Objectives are more specific and achievable than goals. They must be both tangible and measurable. In fact, one way to distinguish between goals and objectives is the "measurement test." If a count, percentage, or other number can be affixed to the idea (even if it is a range or an approximation), then it is an objective. Examples of sourcing-related objectives include:

When it comes time to either rank or evaluate proposals, the objectives should be front and center. To what extent does each supplier make it possible to achieve the objectives for the project, and how do they propose to do it? What degree of certainty does the team have about the intended approach? The answers to these questions will play a large part in selecting which suppliers receive contracts.

Requirements

Whereas proposals are ranked or graded against their ability to satisfy objectives, requirements lead to a straight pass/fail assessment. Requirements are those things that must be true for a supplier to be an acceptable or qualified option for contract award. Examples of sourcing-related requirements include:

As proposals are evaluated, requirements are the place to start. There is no sense in evaluating a supplier's ability to support the project's objectives if one of the requirements is not met. When it is uncovered that a proposal is not qualified, procurement will first flag the proposal, then clarify with the supplier to be sure there was not a misstatement or misunderstanding, and then meet with the project team to have them confirm and vote to eliminate the supplier from contention.

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One question that often arises in the kickoff meeting is why the goals, objectives, and requirements have to be established so early in the project. While the preparation of the request for information (RFI) or request for proposal (RFP) and the effort to build a list of supplier contenders can begin before they are finalized, none can be completed without them. Goals, objectives, and requirements must be absolutely in place before the project team takes a more-than-cursory look at proposals. Otherwise, it is hard to be sure that preference for a supplier does not play an undue role in setting them.

Making an investment in goals, objectives, and requirements early in a project pays dividends later on, when the team is dizzy with the details and choices before them. It is the clarity of the kickoff that makes it possible to build an actionable framework within which to qualify and evaluate supplier proposals for a strategic sourcing project.

Kelly Barner is the co-owner of Buyers Meeting Point, an online resource for procurement and purchasing professionals. She has been an industry award-winning supply management practitioner and consultant, and is now an independent thought leader and author on procurement, sourcing, and purchasing. She is co-author of Supply Market Intelligence for Procurement Professionals: Research, Process, and Resources. Kelly earned her MBA from Babson College.