A general sourcing process can be divided into five stages, which are illustrated here:
1) Stage 1: Investigation and tendering. In this stage an organisation identify the core and non-core activities and analyze market/customer requirements and competitors so that the firm’s objectives, target markets and positioning can be determined. The scope of the strategic sourcing project is outlined in a business plan with upper management, and the initial work plan and baseline criteria for measuring improvement are established and documented in a process plan.
2) Stage 2: Evaluation. Specific supplier selection criteria are developed that are used to identify a list of appropriate suppliers. The sourcing strategy is refined as needed and the cost models are finalized. The economic and operating benefit of completing the project are then estimated.
3) Stage 3: Supplier selection and development. Final suppliers are selected and the negotiation of an agreement with the selected suppliers is conducted. A technical assessment of the selected suppliers that leads to savings identification needs to be conducted. The implementation schedule and timelines for the selected suppliers are then developed.
4) Stage 4: Implementation. A performance analysis program should be put in place. This include a series of activities. The implementation team is placed and the implementation strategy and schedule are published. Agreements on shared resources and supply and logistic terms are develop. Expected results are documented, both internally and with the selected suppliers. Measured of actual performance results is conducted and progress is reported periodically.
5) Stage 5: Performance measurement and continuous improvement. The suppliers’ performance is monitored both independently and in conjunction with the processes and resources used by the partners on a routine basis. An in-dept assessment of the effectiveness of the collaborative working relationship with the suppliers is obtained, from which the involved partners can identify problems and seek out continuous improving opportunities. The goal of this stage is to maintain a best in class procurement process that is a dynamic and flexible enough to meet changing market conditions.
Among the five stages the last two represent big challenges and are the more difficult to implement correctly.
The figure below illustrates the sourcing process:
-Zeng “Global sourcing: process and design for the efficient management” (Supply chain management: an international journal, 2003)