Sourcing is finding or obtaining a potential supplier for goods and services. Strategic sourcing is a complicated process involving a number of interrelated tasks e.g.:
1. Identify or re-evaluate needs- in some instances, needs must be re-evaluated because they have changed.
2. Decide to make or buy- this is whereby an organisation may see whether they can generate the product or services or choose to buy.
3. Identify type of purchase- there are 3 types of purchase starting from the least amount of time and complexity to the most amount of time and complexity e.g. straight rebuy or routine purchase, modified rebuy(change of existing supplier), new buy(developed from
new user needs)
4. Conduct market analysis- a source of supply can operate in purely competitive market(many suppliers), an oligopolistic market(few suppliers) or monopolistic market(one supplier)
5. Identify possible suppliers- these may include suppliers that the purchaser has previously used or new suppliers.
6. Prescreen possible suppliers– This is the process that is used to reduce the number of supplier to those that can meet the purchaser’s demands.
7. Choose supplier- the choice of supplier determines the relationship that will exist between the purchaser and supplier organisation and how the relationship will be structured and implemented.
8. Deliver product/ Perform service. The completion of this activity also generates the generation of performance data to be used for the next activity