Sourcing Strategies in Procurement: Which One Is Right for You?

30th May 2022

5 sourcing strategies in procurement you need to know about

Do you know the different types of sourcing strategies in procurement?

It’s important to think about your procurement strategy before you begin the procurement process. When you use the wrong sourcing strategy, you could face increased costs, higher risks, and unsuitable suppliers. However, if you’re unsure about which strategy is most suitable for you, then don’t worry! We’ve got you covered.

In this blog, we’ll explore five sourcing strategies in procurement that can help streamline your procurement management. Keep reading to find out more!

  1. Outsourcing

One sourcing strategy that you should consider is outsourcing the work to a third party. This procurement process is considered the most common of all the sourcing strategies in procurement. It’s practical, and ensures you get the best suppliers to complete the services on your behalf.

  1. Insourcing

On the other hand, you might want to complete the work in-house. If that’s the case, then you should consider insourcing. With this strategy, someone in your existing team will carry out the required work. This option is especially popular with organisations that are looking for cost-saving sourcing strategies in procurement.

  1. Low-cost country sourcing (LCCS)

Another strategy that you could consider is LCCS. Basically, this involves sourcing materials from countries with lower labour and production costs. Like insourcing, this sourcing strategy focuses on cost saving.

  1. Global sourcing

Still looking for sourcing strategies in procurement? You could consider global sourcing.

There are many benefits to sourcing goods and services from international markets. For example, it’s an opportunity to gain insight into how business is conducted around the globe. Similar to LCCS (sourcing strategy three), it could also lead to money-saving procurement practices.

  1. Prime/sub arrangements

This sourcing strategy is great for businesses that are looking for a streamlined process with minimal hassle. With this method, the outsourcing process is completed by the third-party outsourcing company. So, most of the transactions take place between the outsourcing business and the subcontractor.

Why are sourcing strategies in procurement important? 

It’s important to find the most suitable sourcing strategy for your organisation. Here’s why:

  • Reduced costs 

By taking the time to consider sourcing strategies in procurement, your organisation is sure to save money. This is because you can find a process that is most suitable for your requirements and budget.

  • Fewer risks

It’s also important as there are fewer risks, for buyers and suppliers alike. When you consider the different sourcing strategies in procurement, you’ll be able to assess the risks of each type. As a result, you can decide which method poses the least risk to your organisation. Buyers can also work to minimise real or potential risks so they’re ready to navigate their procurement activities.

  • Opportunities for improvement

By learning about different sourcing strategies, you’ll have the opportunity to continuously improve your procurement processes.

For example, your business might have relied on a particular strategy for many years. However, the world of procurement is everchanging, and newer methods might have been introduced. If you don’t take the time to learn about the different sourcing strategies in procurement, you could be missing out. There could be a strategy which is more suitable, which could save your organisation money and increase quality and efficiency.

  • Find the best suppliers

Finally, it’s important to consider your sourcing strategy as this will help you find the right suppliers for your project. For example, if you don’t have the capabilities in-house to complete the work, then insourcing won’t work for your business. Therefore, this wouldn’t be a suitable strategy, and the quality of the work might suffer as a result.

On the other hand, if you’ve identified the talent in-house, then outsourcing or prime/sub arrangements might not be appropriate. Instead, it would make more sense to delegate the work to your existing workforce.

In summary

In this blog, we covered examples of sourcing strategies in procurement, including:

  • Outsourcing, where you outsource the work to a third party
  • Insourcing, where you complete the work in-house
  • Low-cost country sourcing (LCCS), where you source materials from countries with low labour costs
  • Global sourcing, where you source goods and services from international markets
  • Prime/sub arrangements, where the outsourcing process is completed by the third-party outsourcing business on your behalf.

Remember, this list of sourcing strategies is not exhaustive. There are other types of sourcing strategies in procurement that could be suitable for your organisation and your requirements.

It’s important to find the most suitable sourcing strategy for your organisation because:

  • You can reduce costs
  • There are fewer risks
  • It could lead to opportunities for improvement
  • You can find the best suppliers for your project.

How can Hudson Procure help your organisation?

Procure Consult 

With Procure Consult, we offer support with tender management and ad-hoc procurement consultancy. Our expert team will manage the end-to-end procurement process or offer assistance with any stage, as and when required.

Procure Health Check 

With Procure Health Check, we’ll conduct a full review of the strategic and operational procurement processes within your organisation. We’ll identify the areas that need improvement and help you drive greater value from the procurement process.

Procure Analyse 

The purpose of Procure Analyse is to conduct a high-level analysis of your spending activity. We’ll help you understand your current strategic purchasing behaviour and highlight areas that can deliver greater value. Procure Analyse is also offered as part of Procure Health Check or as a standalone service. 

Procure Outsourcing 

With Procure Outsourcing, we deliver a range of procurement solutions on an outsourced basis, completely bespoke to you. This can range from delivering multiple tender projects as a package to delivering the full procurement function of your organisation. 

Procure Post 

Are you trying to find a supplier for your project? Post your tendering opportunity onto any of our 11 sector-specific portals for FREE with Procure Post!

Housed by our sister company, Hudson Discover, our portals host thousands of tendering opportunities for organisations of all sizesFor an additional cost, we’ll even help you identify your requirements and find the most suitable suppliers for your business.

Get in touch for a consultation and find out how we can help your business drive better value from procurement.

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