Definition of sourcing: not as simple as it sounds
The definition of sourcing can be simple and much more complex. The simple definition is “the processes involved in identifying potential suppliers, conducting negotiations with them, and then signing purchase agreements with them to provide goods and / or services that meet your company’s procurement needs.”
Hiring suppliers for a company is one of the key business processes that will have a direct impact on the bottom line of any company. If you make a mistake with a supplier, you may be waiting for your urgent supplies, receiving non-compliant supplies, or not receiving supplies at all if they go bankrupt. Without supplies, a business cannot function and cannot sell products to others. Negotiate the wrong price level and your company’s profit levels will be directly affected.
With large ad hoc purchases and services, the complexity of the sourcing definition increases. In this situation, the supply will include the production and evaluation of the prequalification questionnaires (PQQ) and the invitation to tender (ITT), in addition to the whole new set of procedures that are inherent to this complex activity. A bidding situation must be fair and considered fair, so the procedures must be very precise and standardized.
When it comes to staffing, whether it’s the simplest way to hire new staff or the more complex requirement for hired staff, the definition of hiring is even more extensive. When searching for staff, individual staff providers should first be chosen and then each potential staff member should be evaluated and reviewed. These activities are surrounded by legal limitations and human problems. This ensures additional procedures with a two-stage supply.
Perhaps the most complex definition of provisioning is that of a large provision of services only in one area such as facilities management or IT. In this purchasing activity, the company would explain its business problem, the current situation and what it hopes to achieve. It would then be up to potential suppliers to come up with their own solutions. Evaluating this type of offer is very complex, has many different steps, and is fraught with risk.
Perhaps the simplest definition of sourcing is that surrounding a procurement auction. In this case, a project is posted on an appropriate electronic auction website and suppliers must come to you and bid on their own. In this procurement activity, much of the sourcing procedures are computerized, and suppliers need to find you and encourage you to choose them.