Two Approaches to the Definition of Sourcing

What is the definition of “Sourcing”? — two Purchasing approaches

The most common definition of Sourcing is as follows: “it is the process of identifying potential suppliers, leading to negotiations, and then moving on to supply contracts with these suppliers.”

However, there are several definitions of Sourcing that are divided into two main categories: Strategic Sourcing and Global Sourcing.

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First Definition: Strategic Sourcing.

The first definition of Strategic Sourcing (i.e.strategic buying) is a concept that was introduced by major consulting firms in the late 1980s. It is now considered to be a standard buying strategy used by many blue chip companies.
However, the most common definition of buying is Strategic Sourcing. This corresponds to the process of taking advantage of purchasing opportunities by continuously reviewing needs in relation to market opportunities.

Strategic Sourcing was created by General Motors in the 1980s and is now a Common Purchasing business tool. The rise of China and its production capacities has opened up numerous possibilities for Strategic sourcing.
Strategic sourcing is often used for high value services, ad hoc purchases, and advertising purchases. There are several Strategic Sourcing processes, namely:

• Evaluating buying cycles current of the company.
• Assessment of what is currently available on the market.
• Exam ofcost-benefit analysis the use of other suppliers.
• Examining potential suppliers.
• Update of Sourcing strategy current.
• Negotiations with potential suppliers to ensure that they comply with the new analysis of procurement strategy and cost-benefits.
• Implementation of the new supplier relationship.
• On an ongoing process, review and Strategic Sourcing Update.

Second Definition: What is Global Sourcing?

The second definition of Global Sourcing (i.e.globalized purchasing) is the purchase of products and services regardless of national borders. It is particularly popular in the countries of the European Union and in Asia. These two areas are less concerned with geographic boundaries.

The rise in Chinese and Indian production capacities has led to a considerable increase in purchasing in these countries in recent years. Businesses that buy are looking for low-cost labor. Many countries also offer tax benefits and offer attractive rates to encourage investment.

However, another definition of Sourcing exists, that of Personnel Sourcing. It is the proactive search for highly qualified profiles for companies, a competitive advantage. Staff sourcing is also a complex procedure that is used when a large number of part-time or short-term employees are required.

Read also: The stages of supplier sourcing.