Agile sourcing

Agile sourcing is a collaborative style of sourcing, and one which is more off-the-cuff than traditional processes. It involves making fast-paced decisions, backed by data, to adapt to market conditions as they change. The nature of supply chains is that they shift with the various external factors that impact them, such as the attacks on shipping in the Red Sea in 2023 and 2024, that led to major logistics firms suspending services through the Suez Canal. 

The downside to this is that it makes it difficult for procurement teams to accurately forecast future performance because you cannot be sure what your supply chain will look like. It requires strong data collection and analysis skills to be able to execute effectively. 

Vendor managed inventory (VMI)

Your company and current suppliers collaborate to improve the process of managing inventory for a more efficient process. The seller takes on responsibility for managing the buyer’s inventory, helping them understand when to increase and decrease supply so the buyer does not have too much or too little stock. 

This requires technology to help the supplier forecast demand and ensure the correct level of supply. You can reduce your overheads, as you store less inventory so you need less space. You have lower expenses upfront as well. 

The challenges include losing control of your supply and stock, as well as the potential for working with partners who supply more stock than necessary to increase profits. 

Group purchasing

Group purchasing involves multiple buyers joining together in an organization to buy in bulk and enjoy the discounts that brings. By bringing your businesses together, you have more purchasing and negotiating power in the market. 

You also benefit from not having to spend as much time negotiating with suppliers too. One party negotiates on behalf of the organization, saving time and money for you. 

However, there is less flexibility for your business and, if you are buying at the same price as your peers, you have less room to undercut them on the final retail price. 

You can, however, choose group purchasing in cases when there is limited supply and vendors are raising prices too much. When you join forces with other companies, you are better positioned to negotiate more favorable terms. 

Green sourcing

Also known as sustainable sourcing, green sourcing revolves around companies choosing suppliers based on their environmental, social and governance (ESG) credentials. This means working with suppliers who are actively reducing their carbon footprint, are committed to their employees, and are run in a manner that is transparent and accountable. 

This is a positive message for a company to share with its stakeholders and can help with your ESG reporting, too. However, it limits the number of suitable suppliers with whom you can work and can sometimes lead to paying higher prices for the goods. 

eSourcing

eSourcing takes the procurement process online. Rather than relying on a paper process and manual supplier selection, you utilize a digital platform to gather details on bids from prospective vendors and use data analysis to make decisions that benefit your business. 

This includes sending out a request for information (RFI) or request for quotes (RFQ) and letting the online platform collate the bids, along with other information to help you make a well-informed and profitable decision in a fair and transparent manner. 

eSourcing saves you time, as it automates the procurement process. 

Single sourcing

With single sourcing, a company decides to use just one supplier for a particular product. The benefit of this is that you can create a strong working relationship based on reliable continued transactions. You know that you will get the quality of product that you need at a regular agreed price and you can sometimes gain exclusivity over that item if the deal works for both parties. 

The downside of this is that overreliance on a single supplier increases the risk of losing the supply in the event the supplier goes out of business or cannot provide the products for some reason. 

Multi-sourcing 

This is the flipside of single sourcing and involves you keeping your options open. In this procurement strategy, you use different suppliers for the same product, continually looking for the most cost-effective deal, the quickest to ship, the company most able to supply in large volumes, or any other criteria. 

This reduces your reliance on single sources and allows you to pitch the suppliers against each other to negotiate a better deal for your business. If one supplier suffers a disruption to their service, you are agile enough to look to a competitor for the product with little impact on the smooth running of your supply chain. 

You can often drive innovation through competition, but this strategy does mean that you don’t develop a deep relationship with any particular supplier. 

Collaborative sourcing

Collaborative sourcing requires supply chain entities to work together to achieve benefits. In industries where margins are tight, traditional buying and selling in the chain means that one party can end up taking the brunt of each entity ahead of them taking their cut. 

Working together with supply chain organizations to develop innovative new products, reduce waste and repeat efforts, and share raw materials can make the system more profitable for both parties. 

It takes a deeper working relationship than the traditional buy-and-sell transaction, and this means that the parties have to get buy-in from decision-makers, but collaborative sourcing can work for many partnerships. 

Local sourcing

Local sourcing is a strategy that engages suppliers in the vicinity of your organization. This often refers to the same country, but some businesses like to work with those companies within the same district. There is a range of benefits, from the reduced risk of supply chain disruption, because the product does not have as far to travel, to shorter delivery times and better environmental sustainability. 

It also shows a commitment to the local community and allows for greater control over the shipments, as it is easier to monitor local suppliers.  

The challenges are that local sourcing limits the amount of competition for the job, meaning you might not always get the best price. 

Global sourcing 

Global sourcing looks to other countries for suppliers. The advantages include that you can source products from regions that might be more cost-effective than your own. Labor costs could be lower, you can seek out territories with fewer territories, and you can find products that are not available in your own country.

When you look globally for procurement, there is more competition and a wider range of suppliers to choose from, increasing the chances of finding a partner that suits your exact requirements. 

However, long distance supply routes increase the risk of disruption and there could be a language barrier to contend with, too.