In the purchasing cycle, sourcing refers to the process of supplier search, qualification and selection.
This process varies based on whether tactical purchasing or strategic procurement is used. Tactical purchasing is more reactive: the supplier search might be limited to using an approved vendor list including transactional history files. This implies the supplier already meets the qualification criteria. If multiple suppliers are available, the buyer might issue a request for proposal to find the lowest price. In some cases, only one supplier might be identified. A more detailed search might be pursued that includes asking the organization's current network of suppliers and salespeople or using internet-based technologies such as electronic catalogs and search engines.
Strategic procurement is more proactive—the organization is proactively searching for suppliers. This approach will be much different. The next session will discuss strategic sourcing in more detail. In general, during strategic procurement qualification and selection are more robust and selection takes into consideration factors in addition to price such as technical ability, reliability, and/or after sales service.
Reactive - Transactive - Supply at the lowest price
Proactive - Relationship focused - Analyze total spending
Primarily existing suppliers selected from approved vendor list
Use approved vendor list or bidding process (RFQ) if needed
Rigorous analysis can include supplier ranking.
Quantity and delivery, can include price if not pre-negotiated
Comprehensive terms and conditions with focus on long-term relationship
When approved vendor list not available
Depending on policy:
Search, qualify, select suppliers to create approved vendor list