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Glossary: Sourcing Approaches & Definitions

Sourcing – In business, the process and set of activities related to researching, evaluating, and selecting suppliers from which to procure goods and services. Sourcing is related to both the procurement and supply chain management functions within an organization. [Refer to: CombineNet’s Advanced Sourcing white paper.]

Advanced Sourcing – Sourcing that is further enhanced by involving greater collaboration with suppliers, analysis of bids that consider both price and non-price factors, applying optimization to arrive at the best sourcing decision across all items and suppliers, and deploying a process that is more centralized and makes use of best practices. [Refer to: CombineNet’s Advanced Sourcing white paper.]

Collaborative Sourcing – An emerging partnership approach where disparate buying teams (from within the same organization or from different companies), who are sourcing the same or similar goods and services from the same types of suppliers, combine their RFPs and sourcing needs into the same sourcing event. Goals of collaborative sourcing may include enhancing overall supply chain efficiencies, driving greater cost reductions through more volume-based discounts and indirect cost savings, and optimizing the supplier network.

E-Sourcing – Short for “electronic sourcing”, it is enabling the sourcing process via an online, web-based application. E-sourcing allows buyers to submit their items for bid through a web-based interface, then invite suppliers to view, enter, and submit their bids through that interface. Many types of e-sourcing tools and applications exist in the market, ranging from basic functionality to robust, best-in-class and more advanced e-sourcing capabilities. [Refer to: CombineNet Product Overview.]

Global Sourcing – The sourcing and procurement of goods and services from various geographical locations with the goal of obtaining additional cost savings, efficiencies, or other benefits from suppliers in those regions. Low-Cost Country Sourcing – The activity of procuring goods or services from countries having lower labor and production costs, as a cost-cutting measure. Low-cost country sourcing is a component of an overall global sourcing strategy.

Sourcing Optimization – involves the application of powerful optimization algorithms to evaluate extensive data inputs and scenario constraints to generate the “optimal” decision on which supplier(s) should be awarded the business. Sourcing Optimization is best utilized in sourcing activities where the buying organization is focused on the total value delivered to the organization, rather than just achieving a lowest price for supply. [Refer to: CombineNet’s Sourcing Scenario Optimization]

Strategic Sourcing – The act of taking a strategic approach to sourcing activities, rather than simply collecting pricing or bids from existing suppliers on standard items. Strategic Sourcing can include any number of sourcing strategies, including the pooling or aggregation of spend categories across different business units or stakeholders; combining different items with a common supply base to create leverage within the supply base; and encouraging suppliers to introduce innovation and efficiency to the buying company through a flexible proposal or bidding process. Strategic Sourcing also involved the development and promotion of standardized processes, best practices, training/skills development, and other organizational issues to help better align buying teams across the enterprise. The term “Strategic Sourcing” is often misused to describe any electronic or online bidding activity conducted through an e-Sourcing technology, even when there is little strategic effort included. [Refer to: Putting the Strategy back into Strategic Sourcing]

Tender/Tendering – The bidding process used in procurement to help determine from which suppliers to source goods or services. A tender is the bid; tendering is the activity of collecting and submitting bids. [Refer to: Expressive Bidding in CombineNet]

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