Sourcing approaches

There are two types of approaches when sourcing: tactical, which is also known as operational sourcing, and strategic sourcing.

Tactical (Operational) Sourcing

"Tactical (operational) sourcing is concerned with low level procurement decisions that may relate to low risk, non-critical items, and services."

—Lysons and Farrington, 2020

However, tactical sourcing is also utilised for short term ‘emergency’ reactive decisions and activities to ensure urgent requirements are satisfied.

For example, according to the World Health Organisation (2023) ‘after the Batsirai and Emnati cyclones hit Madagascar’s south-eastern Vatovavy region in February 2022, communities found themselves cut off from basic health services due to more than 150 health structures and stocks of medicines were destroyed or damaged.’ This would have required reactive tactical sourcing to provide urgent health services to the region, which might involve utilising additional suppliers to support the emergency.

Strategic Sourcing

Strategic sourcing is the structured and collaborative process of critically analysing an organisation’s spending patterns to better leverage purchasing power, reduce costs, and improve performance. Strategic sourcing is concerned with high-level, long-term decision making relating to high value - high supply risk items but also bottleneck items that may be low value but have a high supply risk.

Due to the long-term nature of strategic sourcing the approach requires long term efficiency, and the realisation of ongoing value over the medium to long term. This requires robust procurement policies including ethical considerations, a secure supplier base, and partnership relationship thinking.

As a part of the procurement process, strategic sourcing is a knowledge-based activity focussed on total cost of ownership in partnership with the supplier to provide competitive advantage or ongoing realisation of optimum value for money.

This example from the World Health Organisation (2023) after the Batsirai and Emnati cyclones hit Madagascar demonstrates strategic sourcing:

The following year, before Cyclone Freddy hit, despite the torrential rains and extensive flooding caused by the cyclone, no cases of diseases such as cholera were recorded in the country.

Establishing the sourcing approach needs to be aligned to the type of sourcing most suitable for the organisation’s procurement needs. Within healthcare, the type of procurement could be dictated or enforced by the manufacturers or the manufacturing location. Ideally, a secure, reliable, and readily available localised supply at optimum pricing would be the ideal scenario, however, the reality is most pharmaceutical organisations manufacturing facilities are globally based and geographically dispersed. Therefore, managing supply of pharmaceuticals across international borders is an additional challenge that needs to be considered and managed.