A good sourcing strategy can simplify procurement processes and drive organizational success. So in this post, I’ll introduce you to 8 common sourcing types, and you can decide which suits your business model best.
What is sourcing?
Sourcing in procurement refers to the process of identifying, evaluating, and selecting suppliers or vendors for goods, services, or raw materials. It involves finding the right suppliers who can meet the organization’s requirements in terms of quality, price, delivery, and other factors.
For buyers, sourcing could help them identify and select the most suitable suppliers for their desired products, and purchase them at a reasonable cost. Then they can sell them at a good price to get profits.
Explore 8 dynamic types of sourcing
There is a wide range of sourcing methods, and sourcing options are often not mutually exclusive. Here are 8 strategic sourcing methods that can be applied
Single sourcing
Single sourcing strategy refers to buying one or more products from one supplier.
Suppose you are interested in importing wigs from China. When you search for the term “wigs” on Alibaba, you will come across a supplier who offers a variety of related products in different categories. This supplier allows you to purchase one or multiple products from their offerings. The process you are involved in, in this case, is referred to as single sourcing.
Single sourcing simplifies supplier management and enhances the connection between suppliers and buyers, leading to efficient responsiveness to demand. Additionally, it can offer cost savings through bulk purchasing and long-term cooperation. However, if buyers rely heavily on a single supplier, any production issues may result in delayed delivery, and lead to losses.
By the way, if you purchase branded products or your desired product is monopolized, you can only source solely from the brand or authorized supplier.
Multiple sourcing
Multiple sourcing involves procuring the same or different types of products from more than one supplier. For instance, it can occur when purchasing a product from supplier A while also obtaining customized packaging from supplier B. Additionally, if various components of a product need to be sourced from different suppliers, it is also considered multiple sourcing.
Multiple sourcing helps reduce risks in production and enhances the flexibility of the supply chain. Meanwhile, it can promote competition and encourages suppliers to offer competitive pricing. However, multiple sourcing requires buyers to communicate with different suppliers at the same time for management and coordination, which is complex and time-consuming.
Low-cost country sourcing
Low-cost country sourcing (LCCS) refers to the process where buyers located in high-cost countries purchase products from low-cost countries, such as China, Vietnam, India, etc. With the same amount of money, importers can buy more quantities of products in low-cost countries. For example, a toy-selling company in the US imports toys from China, and sells them locally, which is more profitable than buying toys in Japan.
This strategy allows buying high-quality products while enjoying cost advantages and buyers can focus more on marketing and sales, thus expanding business scope.
Near sourcing
Near sourcing refers to the practice of sourcing goods, materials, or services from suppliers close to the buyer’s location. It involves the same region, country, or neighboring countries instead of distant or overseas locations. For example, China wig manufacturers import hair from Vietnam.
Near sourcing aims to capitalize on the advantages of shorter lead times, improved logistical efficiency, and enhanced collaboration with suppliers. It is often seen as a middle ground between local sourcing and global sourcing, striking a balance between cost considerations and proximity.
Local sourcing
Local sourcing means buyers purchase goods from manufacturers within the same country. For example, a tech startup based in California buys chips made in Texas. Compared to sourcing from other countries like Canada, it is more convenient and faster with less logistical risk.
Local sourcing helps to get flexible MOQ, because suppliers can meet local suppliers face to face, making easier negotiation. Moreover, it doesn’t need many documents for customs clearance, and it also helps shorten shipping time and costs. But this sourcing strategy provides limited product varieties and the product costs may be higher compared to sourcing from low-cost countries.
Global sourcing
Global sourcing involves procuring raw materials, components, and finished products from international suppliers instead of relying on domestic sources. For example, a tech company in America purchases electronic components like microchips from Korea, assembles products in Vietnam, and then distributes them globally. In this process, more than one country joins the supply chain to ensure product quality and cost savings.
The biggest advantage of global sourcing is that it enables the procurement of advantageous products from different countries, while also providing cost savings through lower labor expenses in specific regions. However, this sourcing strategy comes with increased logistics complexity and longer lead times.
Outsourcing
Outsourcing means buyers transfer the practice of procurement to external third-party service providers, involving various aspects, such as supplier evaluation, contract negotiation, purchase order and invoice processing.
For example, an Amazon seller in Canada hires a sourcing agent like Jingsourcing to import pet supplies from China. Suppose he wants to source 10 types of pet toys and 10 types of pet accessories, our company can quickly find the best suppliers for each product and help him get a competitive price. It is for much time and effort savings, because selecting at least 5 suppliers as alternatives is necessary, which means a minimum of 100 suppliers here.
Also, we will follow up on the whole sourcing process. If any other demands occur, we will communicate with the suppliers on the buyer’s behalf.
Outsourcing enables flexible procurement planning and streamlines the purchasing process with the assistance of sourcing companies. It also saves costs and resources, allowing buyers to concentrate on other critical operations.
Prime/subcontracting arrangements
This is a type of outsourcing, and the work is subcontracted by the outsourcing agency to another company. It occurs when finding outsourcing supplier A to help import LED lights from China, and supplier A further subcontracts a portion of this procurement task to supplier B, such as the purchase of LED chips. This type of sourcing is commonly used by large outsourcing procurement companies.
4 tips for effective sourcing
Define clear requirements
You should know clearly about your sourcing requirements, including quality standards, quantity needed, delivery timelines, and any product certifications or qualifications required. This ensures that both you and potential suppliers have a clear understanding of expectations.
Research and evaluate suppliers
When you find suppliers on wholesale websites like Alibaba, ask them questions to identify potential suppliers that meet your requirements and check if they are located in industrial clusters for your desired products. Then compare them to find the most suitable one and place an order.
Consider the total cost of ownership
You should also consider the total landed cost, including the product prices, transportation costs, customs clearance fees, etc. It helps in making cost-effective sourcing decisions.
Monitor supplier performance
During the cooperation, you can reevaluate your suppliers by setting some indicators, like on-time delivery rate, defect rate, response speed, etc. For those that you believe have room for improvement, you can make optimization plans, and follow up on the result to get a long-term partnership with suppliers.
Jingsourcing empowers your business through expert sourcing
As a leading sourcing company in China, Jingsourcing has helped 4000+ importers source and customize products from China. We have the following advantages
Rich supplier database
We have many long-term cooperative factories which are located in the main Chinese industrial clusters. It leads to great sourcing efficiency. We can quickly select suitable suppliers for you in our supplier database based on your needs. And we will collect their samples to send you together. You can compare them at the same time to choose the most satisfactory one, which saves a lot of time and energy.
Lower MOQ
If you search factories on Alibaba for a small order with complex shapes, you may meet rejection. This is because the order can’t meet their MOQs, and factories find it troublesome and unwilling to make them.
So you can ask for help from us. With our extensive network of suppliers and strong relationships, we can connect you with a suitable supplier, even for hundreds of pieces. We also specialize in product customization and will try our best to improve your product solutions.
Strict QC
We offer comprehensive inspection services based on your specific needs. Our inspection method is highly flexible. It means we can prioritize the issues that matter most to you instead of minor ones. If any products are found to be unsatisfactory, we will communicate with the factory on your behalf to either have them fixed or compensate you.
