What is sourcing? Definition!

Sourcing

Aeronautics, electronics, chemistry, subcontracting… Whatever the size and the field of activity of your company, the search for suppliers is an essential step.
What’s the bottom line? Reduced purchasing costs, substantial time savings and, above all, reliable products and services that meet your needs. What is supplier sourcing? What are the stakes for your company?

Procurement Sourcing: all you need to know

Mainly used in the private sector, supplier sourcing is an activity that consists in searching, comparing and evaluating several potential partners in order to select the most suitable ones. From the identification of needs, to the signing of supply contracts, through negotiations and product quality control: sourcing is an essential step that allows you to identify suppliers offering the best guarantees for your company (quality, price, and production deadlines).

The aim of this meticulous prospecting is to obtain a better knowledge of the economic and technical fabric and to refine your specifications. A step not to be neglected, because to select the best suppliers, you must first know exactly what you are looking for and where to find it. Are you looking for manufacturers, wholesalers, distributors or dropshippers, for example? Identifying the right type of partner is important, but it is not enough: you also need to source it in the right place.

The sourcing of suppliers can thus be domestic or international. In the case of international sourcing, you have more products, services and manufacturers at your disposal, and can buy directly from the source without going through intermediaries. The only constraints: quality control of the goods, communication with suppliers, and shipping times. However, these limitations can be easily overcome by using a company specialising in global sourcing. ISP Group, for example, has subsidiaries in Europe, South America, Asia and North America. This international presence guarantees a real knowledge of global markets and, above all, a local presence to ensure quality control and order management.

A few words about e-sourcing
Based on the same principle as sourcing, e-sourcing enables suppliers to be identified via dedicated platforms on the Internet. Real marketplaces that optimise your purchasing activities and simplify relationships thanks to various tools, such as electronic catalogues.

Supplier sourcing: the first key step in the purchasing process

Sourcing is often confused with buying. In order to distinguish them properly, it is necessary to understand the purchasing process: this term refers to the function of the company whose mission is to purchase the goods, services or services it needs. The “purchasing” function includes several complementary activities: requirements specifications, order consolidation, supplier sourcing, supplier negotiations, placing orders, organising incoming inspection, etc. Supplier sourcing is thus carried out upstream of the purchasing process: it is one of the very first stages of the purchasing process.

Finding the right suppliers for a company requires careful monitoring. To do this, the company can turn to its existing panel of partners (provided the need is already known), or turn to new suppliers, if the need is new – or has evolved. In this case, the supplier sourcing process takes place in several stages:

  • Collecting information
    To find the right supplier, you have to compare prices, products, delivery and payment terms, etc. This search must be done after having identified the geographical area of search (domestic or international).
  • Tendering and negotiating
    Once the potential partners identified, communicating a call for tenders allows a first contact to be established. With a view to reducing costs, it is necessary to start negotiating with the supplier and establish a relationship of trust.
  • Anticipate the consequences for the company
    Before signing a contract, you must anticipate its impact on your company’s operations and make sure that it will not have any negative repercussions in terms of logistics and organization (taking into account delivery or payment deadlines, for example).

namely: supplier sourcing is a crucial step, which requires time and an excellent knowledge of the market, especially in the case of new needs. In order to give you the best chance to identify the best partners to support you, outsourcing to a specialized sourcing company, such as ISP Group, is an elegant and efficient solution. You have the guarantee to make a complete tour of the offers corresponding to your needs (both in France and abroad), and at the same time to reduce your purchasing costs.

What are the stakes of supplier sourcing?

Supplier sourcing represents several major challenges for a company, in particular :

  • Increasing margins
    Sourcing allows the selection of suppliers at the most advantageous prices. For you, it is the possibility to reduce your procurement costs, while keeping your selling prices identical. You thus increase the commercial margin realized on the sale of your products and increase your profits tenfold.
  • Avoid dependence on a supplier
    By putting several potential partners in competition, it is easier to negotiate in order to obtain attractive prices and delivery times. Having several partners also allows you to reduce the risks associated with a supply disruption.
  • Strengthen a relationship with a supplier
    In the case of too low an order volume, it is possible that your supplier decides to terminate the contract due to lack of interest. For this reason, maintaining a relationship of trust with your supplier is of the utmost importance. And so ?
  • Build new relationships
    It is important to increase the number of contact points so that other partners can be called upon if necessary. In order not to disrupt the functioning of your company, and to avoid delays in your production deadlines in particular, be sure to have alternative solutions in case of unforeseen events.

In conclusion:
As a true strategic intelligence tool, supplier sourcing responds to many challenges, particularly that of creating added value for your company. By effectively answering the question “who are we going to work with today and tomorrow”, sourcing not only allows you to find the best suppliers, but also to make them long-term partners in the success of your company, making you more efficient in your market while saving you money on your purchasing budget.

Would you like to outsource your sourcing activity to a trusted partner? ISP Group is an organisation entirely dedicated to reducing and optimising purchasing and administrative costs. Sourcing, outsourcing of your purchases and administrative management: discover our solutions and reduce your costs!

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