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Sourcing is the business function responsible for all activities and processes required to purchase goods and services from suppliers. Terms such as “purchasing,” “strategic sourcing,” and “supply management” are used interchangeably but are not the same. Purchasing defines the process of buying goods and services, whereas strategic sourcing, or supply management, involve looking at sourcing from a strategic and future oriented perspective | Chapter 6 Sourcing 6-1 Lecture Outline 6-2 What is Sourcing? The Sourcing Function Sourcing and SCM Copyright 2011 John Wiley & Sons, Inc. What is Sourcing? 6-3 Sourcing is the business function responsible for all activities and processes required to purchase goods and services from suppliers select suppliers negotiate contracts manage process of acquisition Copyright 2011 John Wiley & Sons, Inc. 6-4 Copyright 2011 John Wiley & Sons, Inc. Related Terms Purchasing process of buying goods and services supplier selection, buying, negotiating contracts Strategic Sourcing seeks competitive advantage with sourcing opportunities builds supplier relationships 6-5 Copyright 2011 John Wiley & Sons, Inc. 6-6 Copyright 2011 John Wiley & Sons, Inc. Evolution of the Sourcing Function 6-7 Copyright 2011 John Wiley & Sons, Inc. Consumer vs. Commercial Sourcing Consumer many suppliers buyer is final customer small portion of supplier’s total business little ability to negotiate 6-8 Copyright 2011 . | Chapter 6 Sourcing 6-1 Lecture Outline 6-2 What is Sourcing? The Sourcing Function Sourcing and SCM Copyright 2011 John Wiley & Sons, Inc. What is Sourcing? 6-3 Sourcing is the business function responsible for all activities and processes required to purchase goods and services from suppliers select suppliers negotiate contracts manage process of acquisition Copyright 2011 John Wiley & Sons, Inc. 6-4 Copyright 2011 John Wiley & Sons, Inc. Related Terms Purchasing process of buying goods and services supplier selection, buying, negotiating contracts Strategic Sourcing seeks competitive advantage with sourcing opportunities builds supplier relationships 6-5 Copyright 2011 John Wiley & Sons, Inc. 6-6 Copyright 2011 John Wiley & Sons, Inc. Evolution of the Sourcing Function 6-7 Copyright 2011 John Wiley & Sons, Inc. Consumer vs. Commercial Sourcing Consumer many suppliers buyer is final customer small portion of supplier’s total business little ability to negotiate 6-8 Copyright 2011 John Wiley & Sons, Inc. Consumer vs. Commercial Sourcing Continued Commercial larger volumes purchased very specialized purchasing needs number of suppliers may be limited large sums of money often imbalance of power buying contracts legal, ethical, environmental, security concerns 6-9 Copyright 2011 John Wiley & Sons, Inc. Impact on the Organization Operational Impact right materials, right quantities, right place, right time optimal inventory balance Financial Impact sourcing spends 50% - 90% of revenue in most manufacturing organizations large sums of money can have huge savings impact 6-10 Copyright 2011 John Wiley & Sons, Inc. Impact on the Organization Continued Strategic Impact support organization’s strategic direction Risk Mitigation minimize supply disruptions and protect reputation ensure suppliers meet performance standards Information Impact collect information on prices, suppliers, goods, new products and technologies 6-11 Copyright 2011 John Wiley & Sons, Inc. Sourcing .
