Sourcing; Definition and Its Characteristics

An important activity that businesses must do to run a successful business is sourcing. It plays an important role in ensuring that these businesses get the best quality products and goods for their market. So, what is sourcing and what are its characteristics? This article provides answers and also explains how to carry out good sourcing. Know about what is Sourcing; Definition and Its Characteristics.

Sourcing; Definition and Its Characteristics

Sourcing is defined as the process of looking for and identifying the right products and suppliers for your business that provides the best value. There are many ways for a business to carry out sourcing. Getting the best possible products is the goal of sourcing. So, proper evaluation is key.

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Importance of Sourcing for Organizations and Suppliers

When sourcing is properly implemented, there is an endless well of benefits for the business. Sourcing is mostly important because it helps the organization in achieving its product quality objectives. The main benefits of sourcing are as follows:

  • It helps the company with cost management. When the company strikes a good rapport with the suppliers, they get lower prices for purchasing goods. It is equally beneficial to the supplier, as they also get reduced competitive sales prices.
  • It also fosters stability. When the organization and the supplier have a good buyer-seller relationship, they will continue to do deals with each other. There is a feeling of trust from both parties. An organization will always stick to suppliers that prove themselves reliable over time.
  • It assures suppliers of income when they can form a relationship with the organization.
  • Effective implementation of sourcing can also help reduce risks. This is because there is accountability between the organization and its supplier. In the long run, risks will be mitigated and there will be fewer cases of problematic products.

How to Carry Out Sourcing

An organization needs to map out a plan and structure for its sourcing process. For most businesses, sourcing follows a similar pattern, outlined in the following steps:

  • Strategizing

The first step in sourcing is building a strategy to follow when the process begins. This is where you decide how to purchase the products most effectively. You should also decide the model, process, and supplier requirements.

  • Analysis

Here, you analyze potential suppliers and what they can offer your business. You consider pricing, quality, and all the requirements that you highlighted when building your strategy.

  • Negotiation

This is when you go after the suppliers that meet your requirements and negotiate with them. You may conduct interviews to help assess them, then you choose a supplier based on who best fits your organization’s vision. When interviewing the suppliers, you must also discuss logistics and payment.

  • Implementation

Now that you know the suppliers that fit your vision, you can go ahead and partner with them. You can now build a supply chain and buyer-seller relationship with your suppliers.

  • Monitoring Results

After selecting suppliers and implementation, you need to know if your process was successful. So, you should monitor the results by assessing your supplier’s performance over a period to determine success. If your process has been successful, you can now set a benchmark for the product. 

The Sourcing Business Models

The model defines how the business controls the economics of the relationship between them and the supplier. There are seven models for sourcing and they include:

  • Basic Provider Model
  • Preferred Provider Model
  • Approved Provider Model
  • Vested Business Model
  • Performance-Based Model
  • On-Demand Delivery Model
  • Shared Services Model
  • Equity Partnerships

What are the Types of Sourcing?

The types of sourcing mean where the organization looks to get its sourcing services from. Some of the types of sourcing include the following:

  1. Insourcing
  2. Near Sourcing
  3. Outsourcing
  4. Global sourcing
  5. Joint Ventures
  6. Low-cost Country Sourcing

What is Procurement?

One can easily confuse the idea of sourcing with that of procurement. While they are related, they are not the same thing.

Procurement means acquiring necessary goods and services for businesses. It involves timing the acquisition process for a business so that it is highly effective and devoid of errors in spending. 

How is Procurement Different from Sourcing?

Procurement and sourcing are closely related and are sometimes interwoven. However, the difference between the two concepts lies in their characteristics and processes.

We can say that sourcing is a complete process that involves everything from searching for suppliers to negotiating and sealing contracts with them. It is mainly concerned with the suppliers and controlling the supply chain.

On the other hand, procurement is only involved with the acquisition of goods and services. It is done after the initial sourcing, where businesses look for more effective ways to manage their spending.


Here, we have known about Sourcing; Definition and Its Characteristics. To properly conduct sourcing, an organization must consider many factors. The best suppliers must be selected to ensure that the company gets the best quality goods and services.

Frequently Asked Questions 

  1. What is outsourcing?

Outsourcing is when an organization hires or partners with another independent company to handle some of its operations.

  1. What are some things to consider when selecting suppliers?

When selecting a supplier for your business, you need to consider the following

  • Experience
  • Pricing
  • Reviews from the supplier’s previous clients
  • Quality of products
  • Adaptability
Sourcing; Definition and Its Characteristics

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