Sourcing

Sourcing is the process of identifying, evaluating, and selecting suppliers of goods and services to meet an organization's requirements. It is a core function of procurement and supply chain management, focusing on obtaining the right materials or services at the right price, quality, and time. Sourcing may be strategic, aiming to optimize value and risk over the long term, or tactical, handling immediate purchasing needs.

The typical sourcing process includes market research to understand supplier availability, discovery of potential suppliers, evaluation and selection based on predefined criteria, negotiation and contracting, onboarding, and ongoing supplier relationship management. Tools such as requests for information (RFI), requests for quotation (RFQ), and requests for proposal (RFP) are used to gather data and bids. Digital sourcing platforms and supplier scorecards help monitor performance and risk.

Sourcing decisions can be internal (using existing resources) or external (outsourcing or procuring from external vendors). They can be direct (raw materials, components) or indirect (office supplies, services). Strategies include single-source versus multi-source, and local versus global sourcing, depending on cost, quality, and risk considerations.

Key criteria include total cost of ownership, quality and conformity, capacity and lead times, financial stability, compliance with laws and standards, and supplier reliability. Sustainability and ethics are increasingly central, with responsible sourcing addressing labor practices, environmental impact, and traceability, including issues such as conflict minerals and code-of-conduct adherence.

Risks in sourcing include supply disruption, price volatility, regulatory changes, and supplier insolvency. Effective sourcing mitigates risk through diversification, supplier development, transparent contracts, and regular performance reviews. Good sourcing can improve cost, quality, innovation, and resilience across the supply chain.