Supply Chain Management

What is Sourcing in Supply Chain Management?

Many people will say they are sourcing a product. However, the term sourcing can be confusing because it is a term that is used mostly in supply chain management.

Sourcing refers to purchasing a product or service that will be used in your supply chain management. You must be mindful of the following factors when sourcing

  1. Identify potential suppliers 
  2. Get in touch with the source
  3. Choose the source you want to buy from

You need to follow several steps to source a product/service.

  1. Understanding your needs
  2. Understanding the market supply
  3. Create a sourcing strategy
  4. Implement your sourcing strategy
  5. Get in touch with potential suppliers
  6. Evaluate potential suppliers
  7. Finalize the purchase and agreements

You should ensure that you source properly and have backup sources if your first choice in souring fails.

Sourcing and Procurement

Sourcing refers to the procurement of products or services for your supply chain management. Sourcing involves more than buying products from people. There are many steps involved in finding a reliable source.

These are the key steps to sourcing products or services properly.

  • Find and evaluate potential suppliers
  • Get in touch with these suppliers
  • Choose the supplier that best suits your needs.

Sourcers are about engaging and selecting potential suppliers. Sourcing involves completing all steps necessary to obtain the product you want.

It is much more complex than simply purchasing a product. Proper sourcing requires certain additional steps to be taken during the purchasing process. Sourcing is all about ensuring you get the best product from the right supplier at the right price.

How to Source Products and Services

You must follow several steps to ensure that your product or service sourcing is successful. These steps are vital and should not be overlooked.

These are the main steps to sourcing services or products:

  • Understanding the Need – To source, the right product or service begins with understanding the need. It will be difficult to understand the need and determine what services or products you want to purchase.
  • Understanding the Market Supply To source the product correctly, you must also understand the market supply. Is it easy or difficult to obtain the product? Is it difficult to obtain? These are all questions that you must answer to identify the market demand for the products you’re buying.
  • Create Your Sourcing Strategy. A sourcing strategy can help you be more efficient in your product and service sourcing. You may not be able to find the best suppliers if you source products or services randomly. This stage is where you need to define your sourcing strategy. Do you plan to search online? Do you plan to attend a tradeshow? How will you find suppliers?
  • Implement your Sourcing Strategy – This step will help you implement your sourcing strategy. Send the products that you are interested in to potential suppliers.
  • Engage Potential Suppliers This step will allow you to engage with the potential supplier. Asking specific questions can reveal a lot about a company.
  • Assess the Potential Suppliers – This step is where you assess potential suppliers. It involves gathering all information from suppliers and then evaluating the materials. You may find two very similar suppliers, but you feel one is superior. I tend to go with my gut instinct or choose a supplier I feel is the best for me. I consider a supplier’s terms, minimum quantities, return policies and guarantees, and quality. These are all important things that you must consider.
  • Finalize the agreements and purchase. Now that you have evaluated your supplier, it is time to close the deal and complete the purchase. Now, you need to negotiate the price and terms of the products or services you want. We will normally order the minimum quantity for first-time suppliers to test their abilities and see how we can work together.

A good sourcing policy will help you ensure that you have the best supplier possible for your product. It will help if you always have backup suppliers if the primary supplier fails to work out.

Properly sourcing a product/service is an integral part of supply chain management. Sourcing is an integral part of any business’s success. It can be very costly to source the right products and services at the right prices and terms. This could have a serious impact on your business and bottom line.

Common Sourcing and Product Procurement Errors

Common sourcing and procurement errors include 

  1. Not fully understanding what they are purchasing or sourcing
  2. Not understanding the actual product and quality requirements
  3. Not properly vetting the vendor
  4. Misunderstanding the vendor’s capabilities

If you want to learn more about Supply Chain Management 101 or Supply Chain Management Fundamentals attend our course now!

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