Sourcing essentials

What is Sourcing?

Sourcing is defined as ‘The locating of products or services that are required for your organisation to operate. It’s about identifying your organisation’s needs and then deciding on the best suppliers to obtain the products or services from.’ (CIPS, 2023)

Sourcing involves assessment and analysis of the supply market to identify viable suppliers
that can meet your organisation’s needs in terms of achieving ‘The Five Rights of Procurement’: quality, quantity, price, place, and time of delivery.

A sourcing strategy is a plan for creating an advantage by continually reviewing current needs against procurement opportunities. This also supports opportunities to balance achievement of the ‘five rights’ of procurement and gives added value opportunities to develop sustainable supplier relationships.

Sourcing is a critical part of the procurement cycle steps 1 – 6 which contributes to, and is supportive of, effective organisational outcomes and success. There are different types of sourcing methodology and approaches to sourcing. Correct selection of the sourcing type and approach is fundamental to ensure successful outcomes for the organisation and all its stakeholders.

Sourcing in line with the five ‘rights’ of procurement which is goods and services sourced at the ‘right price’, delivered to the ‘right place’, at the ‘right time’, in the ‘right quantity’, to the ‘right quality’ can be challenging.

For example, the conflict between ‘right price’ and ‘right time’ is a common challenge, especially when the need is urgent. Achieving the ‘right time’ might incur additional costs (airfreight would be more expensive than delivery by land and/ or sea freight) which impacts on the overall price paid. The ‘right time’ would be achieved to the detriment of achieving ‘right price’.

According to the World Health Organisation (2023) ‘Universal health coverage can only be achieved when there is affordable access to safe, effective, and quality medicines and health products. Countries face a range of obstacles to achieving this, including rising prices for new medicines; shortages and stock outs of essential medicines, especially for noncommunicable diseases, and the growing problem of substandard and falsified medical products entering the global supply chain. Added to this, there are other challenges to ensuring that medicines are not only available but are used appropriately.’

‘Antimicrobial resistance has become a worldwide problem largely due to overuse, and misuse of opioids has led to an addiction epidemic in some countries. Knowing where to tackle the problem is the first step.’

The second step is to identify the correct sourcing approach!