There has been a significant shift in manufacturing strategies since the 19th century. Some retailers have been sourcing products internationally to achieve a cost advantage. The sourcing strategies of a firm depends on various factors, the supply chain, and the market demand. In many areas, sourcing strategies are primarily considered from two perspectives: the choices among possible supply markets and supply channels.
Some common issues faced due to the absence of right sourcing strategies :
Here are some suggestions to boost your sourcing strategies :
1. Analysing the need to the source :
Identifying the need for sourcing would help you know the current business scenario. The knowledge itself is necessary for building a strong management team. The company also needs to analyze point of sale data and decide on the replenishment of requirements. Collect as much data as possible, either via market survey or face-face interaction to analyze the current need of your business.
2. Research about your market :
You must try to understand the market before you set out for sourcing. The latest findings have shown a transition from a product-driven character of the manufacturing sector to a market-driven one. The needs and requirements of your market will enable you to decide on the right sourcing strategy. Often the retailers have to capture the market trends, the industry being highly competitive. This requires the company to be updated with the current market knowledge.
3. Evaluate the Supplier’s market :
Sourcing needs a thorough understanding of the supply chain and the supplier’s market. Go through the financial reports and credit status of the supplier before finalizing any deal. Make sure your company is compatible with the working pattern of your supplier. The supply chain management requires the retailers and the suppliers to be integrated through shared information. This promotes smooth business transactions, healthy collaboration, and flexible supply relationships.
4. Prepare a sourcing strategy :
Various things need to be considered before you draw up a sourcing strategy. Once you have analyzed your needs, researched your market, and gathered information about the suppliers, use the data to see where you stand with reference to this information. See how much you need to source and how. Prepare your goal and weigh it out against the supplier’s potential.
5. Negotiate with suppliers :
Negotiation is a strategy every retailer must be careful about. You need to understand their pulse while at the same time get the best deal out of them. The efficiency is to have extensive talks where every aspect is considered. Arm yourself with as much information about your suppliers as possible before you get into the talks. Most companies aim for maximum value out of a minimum budget. Therefore leave no stones unturned. Discuss the pricing strategy, delivery time, production capacity, quality, and other terms and conditions.
6. Execute and evaluate :
When you are done carefully building your sourcing strategy, hit the market while at the same time closely monitor how things are going. You cannot know the strategy will work hence it is always better to have a backup plan. Make sure you involve the suppliers in your plan as they too need to feel secure. Develop a smooth communication system and plan out a system to measure out the market responses.
7. Modernizing and Upgrade :
This would mean you are aware of the market risks. Shifts and fluctuations are inevitable, you need to brace yourself for the turns and twists. Your sourcing strategy needs to be revamped at intervals. Use modern methods like digitized data collection and imputation or real-time PMS. Upgrade your plans according to the changing face of the market. Consider market demands, customer preferences, lead times, and hidden costs while restructuring.