Sourcing

• One of the most important decisions in supply chain is to choose who will perform supply chain tasks such as production, storage, transportation, etc.
• So, sourcing decisions are a superset of the outsourcing decisions - we are first deciding whether to outsource or to perform the task in-house.
• Once the decision to outsource is taken, we need to find the best partner (vendor).
• Outsourcing includes all the processes required for purchasing the goods and services for the organization, in order to fulfill the demand raised by the customer.

Vendor selection and development

• Outsourcing is successful if the third party makes the supply chain more responsive (respond to consumer demands quicker) or efficient (cost) or both.
• Managers must first decide whether to outsource the supply chain activity.
• After deciding the outsource, vendors need to be identified and selected.
• To identify and select the vendors, the managers need to decide the criteria of evaluation.
• Should the manager select suppliers who are in similar in capability or look for complementary skills?
• How does the manager know the suppliers and understand them better before selecting them?

Role of sourcing in supply chain

Relevant questions with outsourcing, however, are:

1. Does the outsourcing benefit the firm as well as the vendor?
2. Does the outsourcing increase the uncertainities for the firm?

Steps involved in Outsourcing

• Planning: Overall policy for sourcing. Buy-vs-make decision
• Supplier Selection: Various parameters of evaluation