3 Sourcing Best Practices You Should Know
Sourcing is one of the best ways to obtain high-quality products at a low cost. But to do it right, you need to follow a few simple steps. In this article, we’re going to discuss what sourcing is and how you can apply sourcing best practices for optimal results.
What Is Sourcing?
Sourcing is “the practice of locating and selecting businesses or individuals based on set criteria.” It’s also known as procurement and typically falls under supply chain management. Basically, sourcing is when businesses try to find the best suppliers at the lowest possible cost to gain a competitive advantage in their particular market.
The 3 Sourcing Best Practices You Should Follow
Here are our 3 sourcing best practices.
1. Be aware of your needs
The first step to successful sourcing is knowing both yours and your customers’ needs. If you know what you need, you’ll be able to obtain the resources that will take you there. Run frequent market research evaluations to stay on top of your customers’ needs and see if they’ve shifted. For example, perhaps at first a client needed a pair of casual shoes and decided to purchase the item at your store. But later, this same client might need a different pair of shoes - say, sporty shoes! If you are aware of this shift in your clients’ needs, then you can adjust your sourcing strategy accordingly.
Bottom line: be sure to always evaluate your processes and your products to find possible improvements at every step of the way.
2. Evaluate suppliers
It doesn’t matter if they’re a new contract or a long-standing partner - you should always evaluate your suppliers. A sourcing best practice includes finding different areas of improvement, which means that a big chunk of the work will lay with your sourcing supplier. Procurement costs and optimizations are key to sourcing expertise. So always evaluate your supplier for quality, lead times, and production capacities. And don’t forget to ask yourself if these three things could be better elsewhere.
If you don’t challenge your suppliers on cost or performance, you could end up with complications regarding profitability. A common sourcing best practice is to always review contracts before renewing. For more tips, here are the 11 questions you need to ask to weed out bad suppliers.
3. Track your spending and savings
This should be an obvious one, but we’re going to elaborate on it anyway. You should always track your spending and saving when it comes to sourcing. If you’re spending too much and getting an “over-qualified” product, chances are you will have to overprice it and compromise your profits. Or on the other hand, if you’re concentrating too much on savings, then you might be compromising the quality of the final product and thus giving customers a low-quality item… which will only lead to complaints and reimbursements. Either way, nobody ends up happy. Be sure that the process is set at the right cost, that the cost of production isn’t compromising quality or savings, and that your suppliers aren’t costing you any more than necessary. If any of these elements is not in the right place, it’s time to re-evaluate and adjust.
Sourcing can be a simple process if you do it right. The key is setting time frames to evaluate your suppliers, your costs, and your needs. By following these 3 sourcing best practices you’ll be able to increase your sales’ profitability and take your business to the next level. If you have more questions about how to build a business through sourcing, want to start sourcing from China in 30 days, or need any other information, feel free to contact us!