Generally speaking, sourcing is the process of identifying a company that provides needed goods or services. APICS Dictionary further defines strategic sourcing as “The development and management of supplier relationships to acquire goods and services in a way that aids in achieving the immediate needs of a business. It is entirely aligned with the sourcing portion of managing the procurement process.”
In other words, strategic sourcing is the continuous evaluation of preferred suppliers, goods, services, price, and non-price attributes to achieve the optimal mix of all parameters. The group of (preferably electronic) “request for” documents collectively called “RFx,” which entails requests for quotation (RFQs), requests for proposal (RFPs), and requests for information (RFIs), facilitates the supplier evaluation efforts.
Actual buying or selling (sourcing) takes place via a number of auction events that will be described shortly. Purchases can be direct or indirect, depending on whether they entail direct or indirect materials.
Direct materials are materials that become part of the final product in measurable quantities. These are raw materials for manufacturers, and finished goods and components for distributors. Conversely, indirect materials are materials used in manufacturing that are not normally charged to finished production, such as cutting and lubricating oils, machine repair parts, glue, or tape.
Indirect materials also include maintenance, repair, and operations (MRO) supplies, or items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations. Office supplies, computer equipment, professional and temporary services, catering services, facilities services, travel, internal suppliers (e.g., computer, telephone), and so on are other examples of indirect purchases.
There is a third kind of sourcing/purchase, spot purchase, which is a purchase made for standard off-the-shelf material or equipment, on a one-time basis (”on the spot”). Spot purchase could apply to non-catalog items requisitioned through the procurement module and also to single sourcing events for large purchases that warrant competitive bidding. In the first case, the sourcing module logically must be integrated with the procurement counterpart.
The sourcing process starts from an actual requisition for a certain material or service that follows the creation and posting of an event, bidding, evaluation of bids, selection, and approval of the winner, and transmitting the actual purchase order (PO) or contract to the winning supplier.
In other words, strategic sourcing is the continuous evaluation of preferred suppliers, goods, services, price, and non-price attributes to achieve the optimal mix of all parameters. The group of (preferably electronic) “request for” documents collectively called “RFx,” which entails requests for quotation (RFQs), requests for proposal (RFPs), and requests for information (RFIs), facilitates the supplier evaluation efforts.
Actual buying or selling (sourcing) takes place via a number of auction events that will be described shortly. Purchases can be direct or indirect, depending on whether they entail direct or indirect materials.
Direct materials are materials that become part of the final product in measurable quantities. These are raw materials for manufacturers, and finished goods and components for distributors. Conversely, indirect materials are materials used in manufacturing that are not normally charged to finished production, such as cutting and lubricating oils, machine repair parts, glue, or tape.
Indirect materials also include maintenance, repair, and operations (MRO) supplies, or items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations. Office supplies, computer equipment, professional and temporary services, catering services, facilities services, travel, internal suppliers (e.g., computer, telephone), and so on are other examples of indirect purchases.
There is a third kind of sourcing/purchase, spot purchase, which is a purchase made for standard off-the-shelf material or equipment, on a one-time basis (”on the spot”). Spot purchase could apply to non-catalog items requisitioned through the procurement module and also to single sourcing events for large purchases that warrant competitive bidding. In the first case, the sourcing module logically must be integrated with the procurement counterpart.
The sourcing process starts from an actual requisition for a certain material or service that follows the creation and posting of an event, bidding, evaluation of bids, selection, and approval of the winner, and transmitting the actual purchase order (PO) or contract to the winning supplier.
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