What Is Vendor Sourcing?- Definition
Looking out for vendors is a critical task faced by procurement professionals. The main goal is to meet the right vendors at the right time and place. There are several key factors that determine the selection of vendors. Some of them are price or affordability, location, reliability as reliable vendors will deliver required material efficiently and most importantly stability. The right vendors provide the most appropriate products or/and services in order to meet business needs.
Understanding Vendor Sourcing
When defining what is vendor sourcing in procurement, they two go hand-in-hand. Before you can procure goods, you’ve got to find the vendors and vet them out. Connecting with the right vendors is crucial. If you make mistakes in the sourcing process, it can be difficult – and costly – to backtrack.
Simply put, sourcing is the process of selecting vendors to provide the goods and services you need to run your business. It may sound uncomplicated, but the process can be complex.
Vendor Sourcing involves the following:
- Finding quality sources of goods and services
- Negotiating contracts
- Establishing payment terms
- Market research
- Testing for quality
- Considering outsourcing for goods
- Establishing standards
Importance Of Vendor Sourcing
Strategic planning in the sourcing process is central to cost structure, profit margins, and competitiveness for businesses of all sizes.
- Cost Management
Strategic vendor sourcing provides benefits for both buyers and vendors. Buyers can typically negotiate lower unit pricing for high-volume purchasing. This reduces the costs of goods and keeps retail prices competitive. Vendors benefit because they have a consistent outlet for their goods which makes planning and cash flow more dependable.
When you find the right source for your products, it truly becomes a partnership. Both businesses rely on each other to keep the supply chain intact. Developing a close relationship can lead to higher quality (and efficiency) as vendors and customers work together to identify and minimize the root causes of any defects that hurt both buyer and seller.
- Managing Risk
Besides identifying and solving problems, a strong relationship built of trust can help mitigate risk. When both parties know they can depend on each other, it opens the door to honest conversation. For example, if one party is having temporary cash flow concerns, it can be discussed openly. This lowers the risk for both parties.
Explore Additional Resources to Know More
Watch Webinar, Automate Sourcing Using RFx on ServiceNow
Attend this webinar to learn how to automate your entire sourcing and RFP operations using ServiceNow.
RFP for Vendor Relationship Management Solution
The objective of this Request for Proposal is to select the best Vendor or Supplier Relationship Management Solution Provider to help streamline all engagements with vendors/suppliers right from sourcing and contract to delivery and payments. The RFP outlines 60+ vendor evaluation questions categorized per functional and technical requirements.
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