2. Objectives Today
ā¢ Definition of Sourcing
ā¢ The sourcing process
ā¢ Sourcing information
- analysis of market conditions
- locating supplier
- supplier appraisal
ā¢ Discussion
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3. What is sourcing?
ā¢ Sourcing is the process of identifying, selecting
and developing supplier.
ā¢ Sourcing is a key purchasing activity.
ā¢ Sourcing can be either at tactical and
operational or strategic levels.
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4. What is sourcing?
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Tactical Sourcing Environment Strategic Sourcing Environment
Clearly defined requirements and
specifications
Development of a deep
understanding of requirements
Open bid process with little or no
ability for suppliers to offer
alternative designs or
specifications
Development of a deep
understanding of the supply
industry, product and service
offerings and performance
drivers of key suppliers
Purchase price focus Long-term relationship focus
Non critical items Critical items
Table 1: Comparison of tactical and strategic sourcing business
Adapted: Lysons and Gillingham (2003, p.367)
5. The Sourcing Process
1. Identify or re-evaluate needs
2. Define or evaluate usersā requirements
3. Decide to make a buy
4. Identify type of purchase
- Straight rebuy or routine purchase
- A modified rebuy (Changed to existing supplier)
- A new buy (New user need)
5. Conduct market analysis
6. Identify possible suppliers
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6. The Sourcing Process
7. Prescreen or prequalify possible suppliers
8. Evaluate the remaining supply base
9. Request for proposal/quotation/tender
10. Choose supplier
11. Negotiation
12. Deliver product/performance
13. Post purchase/make performance evaluation
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7. Sourcing Information
ā¢ Information is the key for a successful
sourcing process.
ā¢ The information is important to determine:
- When to buy (the right timing)
- Where to buy (location)
- Who to buy (which supplier)
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8. Sourcing Information
ā¢ Information can be obtained from:
- analysis of market conditions
- locating supplier sources
- supplier assessment
- supplier historical performance
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9. Sourcing Information
ANALYSIS OF MARKET CONDITIONS
ā¢What is market?
- a place where goods and services are brought
and sold.
- large groups of buyers and sellers of wide
classes of goods.
- demand and supply of a single class of
community.
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10. Sourcing Information
ANALYSIS OF MARKET CONDITIONS
ā¢What is the analysis of market conditions
important to sourcing?
ļ¼Forecasting the long-term demand for the
product.
ļ¼It assists in forecasting the price trends of
brought-out items and how material costs are
likely to affect production costs and selling
prices.
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11. Sourcing Information
ļ¼It indicates what alternative goods and supply
sources are available ā it might be more
economical to source items from abroad.
ļ¼Information relating to pay trends, commodity
prices, political factors and the like can assist
in deciding whether to adopt a strategy of
forward buying and stock piling.
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12. Sourcing Information
LOCATING SUPPLIERS
ā¢Suppliers can be located by checking a wide range of
sources.
ā¢This process has been made faster and easier by the
World Wide Web.
ā¢Some unions or professional societies provide
database for sourcing suppliers.
ā¢Access to such databases may be free and unrestricted
or subscriber only.
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13. Sourcing Information
ā¢ However, there maybe several problems that
limit the value of these online searchable
databases:
ļ¼The effort and time required to access several
databases
ļ¼User friendliness of the search engine
ļ¼The quality data content ā time out-of-date,
incorrect data content or basic data only
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14. Sourcing Information
LOCATING SUPPLIERS
ā¢Other useful ways to locate suppliers include:-
ļ¼Salesperson ā the usefulness salespeople is
dependent on their knowledge of the product they are
seeking to promote.
ļ¼Exhibitions ā provide an opportunity to compare
competing products, meet representatives of suppliers
and attend presentations by exhibitors and exhibition
catalogues.
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15. Sourcing Information
ļ¼Trade journals ā provide buyers not only with
information regarding new products,
substitute materials, trade gossip and keeps
buyers informed about changes in the policies
of suppliers.
ļ¼Informal exchange of information between
purchasing and other professionals.
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17. Sourcing Information
ā¢ Five methods used in assessing supplier
capability in this connection are based on:-
ļ¼Past performance ā for existing supplier
ļ¼Reputation ā word of mouth
ļ¼Visit and appraisal ā visit the supplier in order to
make assessment of quality capability
ļ¼Third party certification ā hire third party to assess
the supplier
ļ¼Evaluate of sample product
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19. Challenges of Global Sourcing in Malaysia ā Risk
Assessing in Construction Industry
ā¢ Extensive and efficient infrastructure
ā¢ High quality of telecommunication network
ā¢ Legal system in protecting buyers
ā¢ Data security and intellectual property
protection
ā¢ Geopolitical distance between supplier and
customer
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