Jeremy Ferrer
Webinar :
Matinale Achats de Lyon
Vendredi 14 Février de 9h à 12h30
Supplier sourcing is an essential step in a company's activities. It is a term that every business manager, production manager or logistics manager should know and master. Indeed, even if finding a supplier is not considered to be an added-value task within a company, sourcing suppliers is essential to have results in your production. In this article, discover what supplier sourcing is, what are its advantages and how to succeed in this approach.
The supplier sourcing by definition is an English term that means “search for sources.” It is an approach whose objective is to find the best suppliers on the market. They are the ones that offer the best value for money and who manage to meet production deadlines regardless of the volume of orders. You should know that the market is full of suppliers, ready to offer you the best deals. However, not all are created equal. Hence the interest in sourcing purchases before taking the plunge.
In practice, supplier sourcing consists in listing the providers that you think are reliable, comparing them, evaluating them, and then identifying those who can really meet your needs.
Depending on the needs of the company's purchasing department, several types of suppliers are identified:
- Producers of raw materials: they are the suppliers of the raw materials used by the company to design the products it sells.
- Product assemblers: some companies design only the elements that make up a product or create prototypes. It is up to the assemblers to “assemble” them so that the product takes shape.
- Providers of intellectual services: they can be companies or even self-employed workers providing services to the company.
- Suppliers of technological tools: this can be software useful to the company for its proper functioning or even management applications.
Far from being a simple step to take before making purchases, supplier sourcing is one of the best strategies that a company adopts in order to gain competitiveness. Here are some of the benefits you can get from it:
The main The advantage of sourcing, it is to be able to obtain more attractive rates that allow you to increase your commercial margins. Thanks to this, you could optimize your profits or even save on your purchasing costs. This ultimately allows you to improve the entire production process.
By sourcing, you will have a list of numerous suppliers on the market that you can compare to find what best meets your goals. It is true that this process requires a lot of time at the beginning, but it is worth doing it for better results later.
Sufficient from a single supplier is not the right strategy to adopt for successful purchases. It is true that you can find one that you are happy with for a while. However, by relying on this single supplier, you are taking a lot of risks relating to your supply system and this can impact your production. Sourcing suppliers and having several suppliers in vision leave you more margin. In case of unavailability of one, you will have other alternatives in sight. The aim is to never break the supply chain while maintaining a good relationship with suppliers. In this context, sourcing suppliers is a good strategy for forecasting.
The fact of sourcing suppliers leads to competition between service providers. It encourages them to whip up better deals for you. This can only be beneficial for you and for them, because it will also allow them to optimize their offers and open up to the competition. In this way, negotiation will also be easier.
During the sourcing & purchasing, you will necessarily need to analyze the market segment by segment. This allows you to better know the situation of the market in which your suppliers operate and to predict all the risks associated with the property you want to acquire and its price.
You can save a considerable amount of time in the process of finding suppliers by using a provider specialized in procurement sourcing.
A strategic and important action to ensure the proper functioning of your business, procurement sourcing cannot be improvised. To succeed, it is necessary to follow these few steps. How to do sourcing? This is the ultimate question that procurement department managers ask.
The first step in supplier sourcing consists in precisely identifying your real needs in terms of procurement. Note that there are two types of business needs. First of all, there are fixed needs, i.e. the purchases that the company must make on a regular basis. There are also the needs that are said to be occasional which must only be met on an ad hoc basis as their name indicates. You must take the time to list the purchases according to these types of needs.
Listing purchases is not only about creating a list of the characteristics of the product or service you want, but also about defining the qualities that the supplier should have as well as the other services that the supplier should provide.
For example, to buy software, you need to determine that you need a provider who can provide technical support 24 hours a day.
To do this, you need to ask yourself some questions like: “How will the product or service be used?” Is it a raw material that will be used to design another product or a tool that will be used internally?
Defining all these needs will allow you to find the ideal supplier. For example, if you want to buy products that will be resold, it is best to turn to retail items.
If you need products from specific brands, be sure to deal with authorized reseller suppliers. High-end product suppliers are your best allies if you want to increase your profit margins. If you want suppliers that offer affordable prices, do your research first on specialized search engines or on certain types of marketplaces.
In short, knowing your specific needs allows you to know where you are going to find the right suppliers.
Once your needs are well specified, it is appropriate to move on to the second stage of supplier sourcing, which is to carry out an inventory of service providers who have already worked with you in the past. This step is essential before you even look for new ones. This allows you to know if for a specific need, you still need to look for new providers or not.
For better organization, list all suppliers in a single tool. This will allow you to centralize the information you need.
This stage is among the most important in our supplier sourcing. The aim here is to be able to draw up a list of all the suppliers who are likely to meet your needs at the end. There are many places where you can do supplier sourcing. There are also supplier sourcing tools and platforms on the Internet that allow you to group suppliers from all fields together. However, before that, you must also determine which country you want to be supplied from in order to delimit a geographical area.
There are many sites on the Internet that allow you to source your suppliers. However, you have to be careful when making the final choice, because the web is full of malicious people. Insist on meeting with the supplier for a physical interview to avoid unpleasant surprises.
- General directories such as the Yellow Pages and specialist directories
- Specialized magazines
- The forums
- Comparator sites
- Specialized and general search engines
- Social networks
Word of mouth is also an effective method for sourcing purchases. To do this, do not hesitate to ask your networks and ask them for information on suppliers they have had before.
Forums and trade shows are generally free events that allow you to find suppliers in all areas. The advantage of this form of supplier sourcing is that you can go on site and meet the supplier immediately and personally. During this type of event, you will have the opportunity to look through supplier catalogs.
This can be a great alternative in case you have pressing needs and need to find suppliers quickly. You must closely analyze the supplier sourcing method proposed by the supplier.
The advantage of using this type of service provider is that they are generally professionals who already have networks in various fields. They have a lot of suppliers to offer you, all you have to do is make a choice. Be careful, however, because the service is obviously chargeable.
Sourcing suppliers can be a time-consuming task, but it is necessary to meet certain business requirements. Above all, it is a job that must be done constantly in order not to miss any attractive offers on the market.
Now that you have a list of suppliers obtained through your supplier sourcing, you will have to carefully sort them according to a few criteria to find the ones that best fit your expectations and needs.
The supplier you need should be able to contribute something better than the one who has already worked with you. Find out more about the solutions he thinks he can offer you. Does it provide innovative alternatives? A new expertise?
It is essential to look at the cost and especially to compare it to others so that you can have an objective vision of what you will lose or gain. Do not hesitate to ask him if the purchase price could possibly be reduced according to the volume of orders. The criterion of price competitiveness is important.
For more information, ask for references. Do not hesitate to ask around you about the possibility of a former collaboration with one of your acquaintances. Seniority in the field counts for a lot. In terms of supply system, companies with experience are more reliable even for a large volume of orders.
Geographical proximity is an essential criterion to avoid additional travel costs in supplier sourcing. If the supplier is close to your headquarters, there is less chance of disrupting supply.
- the supplier's means of production
- its quality approach
- the industrial skills it has
- after-sales service
- its ability to respect deadlines and time constraints...
- its seniority in the field
- its turnover
Once you have made your choice, it is time to contact the supplier in question and offer them an appointment. This stage of sourcing allows you to get to know them better, to visit their premises and to see for yourself if your choice is justified or not. In these kinds of processes, nothing beats a physical encounter. In this way, you will also be able to communicate to him your specific needs, your goals and the budget you have thought of. Negotiation will be easier in the case of a physical meeting. The aim of this meeting is also to establish a relationship of trust with the supplier for a long-term collaboration. The aim is to be part of a win-win approach so that everyone can find their benefits in collaboration.
Once the choice has been made and the meeting has taken place, all that remains is to sign the contract. But before that, it is also essential to have a long-term vision of collaboration and in particular the impact that this can have on the functioning of your business.
Whether in terms of organization, procurement or accounting, you must consider all the changes that this implies while encouraging your employees to get involved in the new organization.
A new collaboration can also have consequences on logistics. A remote supplier may require longer delivery times that may have impacts on production or the business process. The role of the procurement sourcing manager is to anticipate the risks incurred by contracting with a defined supplier. The same applies to supplier payment terms. Everyone can have their conditions. It is up to you to judge whether they are reasonable and if you can respect them. You need to think about all of this before signing the contract.
Even if you do not have to be sufficient with a single supplier, it is always important to maintain a good relationship with the one you have recruited for the sustainability of your activities. Indeed, the objective of successful supplier sourcing is to allow a certain continuity in your supply, and therefore in your production chain in order to allow better cash flow for your company.
Building a long-term relationship of trust with suppliers is the solution. This must start at the very beginning of the collaboration, at the stage of negotiating the conditions. It is easy later to find ambiguities in the contract signed by both parties in the event that the terms were not clear from the start. However, this is often a source of conflict between the supplier and the company. To prevent this from happening, be clear about your expectations by putting everything in writing. Agree to make concessions where you think it is reasonable to do so.
Communication is the basis for any good relationship based on trust. Set up a system that gives you the opportunity to talk to your supplier on a regular basis. Schedule meetings to discuss the ins and outs of collaboration, the effectiveness of the established system, and the possibility of improving it.
The fact that you have a system that allows you to closely monitor the work done by your supplier allows you to see where your business needs improvement. Likewise, it gives it the possibility of innovating its services in order to always satisfy the needs of its customers.
Finally, one important thing you need to remember if you want to maintain a good relationship with your supplier is payment. Be sure to pay your supplier on time to avoid conflicts. For more control in the management of your invoices, you can opt for a dematerialization solution: the invoicing software. This tool allows you to better manage your invoices.
BME Consulting can help you in your supplier sourcing.
Trust a professional and be sure to have results that meet your requirements.
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