The Sourcing Process

The Sourcing Process

Definition of Sourcing

  • Sourcing is an essential part of procurement, which involves identifying, evaluating, and establishing relationships with suppliers or vendors.

Stages of Sourcing Process

  • Requirement Identification: The process begins by identifying what goods or services are required.
  • Supplier Identification: After understanding the requirements, potential suppliers are identified who can fulfil these requirements.
  • Supplier Communication: Once potential suppliers are identified, the procurement team communicates with them to discuss needs and expectations.

Supplier Evaluation

  • Criteria for Evaluation: Suppliers are evaluated based on multiple factors, including cost, quality, reliability, and delivery speed.
  • Negotiation: After evaluation, the procurement team negotiates with the potential suppliers to strike the best deal, negotiating on terms such as price, delivery, and payment.

Supplier Selection

  • Supplier selection involves choosing a supplier who has scored the highest based on the criteria set for the evaluation.
  • Contracting: Once a supplier has been chosen, a formal contract is drawn up, which contains all agreed terms and conditions.

Performance Review

  • Performance review involves monitoring supplier’s performance to ensure that they are adhering to the contract and meeting business needs.
  • Supplier Development: If gaps are identified, the supplier may be given support or training to improve their performance.

Importance of Sourcing

  • Sourcing is vital for any organisation as it can lead to cost savings, improved quality, better supplier relationships, and strategic advantage.
  • Effective sourcing involves a clear understanding of the company’s needs, a structured process, and fostering good relationships with suppliers.

Risks in Sourcing

  • Risks in sourcing may include supplier failure, delivery issues, quality issues, and legal issues.
  • Adequate risk management can help in mitigating these risks and ensuring smooth sourcing operations.