Sourcing is all about finding, evaluating, and onboarding suppliers that can provide the best goods and services – with the best terms – for your business. It impacts cost, quality, and the availability of products or services. By securing reliable and cost-effective suppliers, you can ensure a steady flow of materials to not only keep your operations running smoothly but also to meet your customers’ fast-paced demands.
As a preliminary step in supply chain management, sourcing involves evaluating supplier capabilities, negotiating terms and prices, and managing relationships to ensure a continuous supply of quality goods and services. This directly impacts production costs and product affordability, and if done right, leads to savings, improved quality, and better supply chain resilience and agility.
Additionally, sourcing decisions are crucial for meeting sustainable and ethical practices, which also helps you build and maintain a positive brand image.
Every company is unique, so there is no "cookie cutter" sourcing process. However, best practices tend to include certain steps, which are detailed in the following video.
Video Summary
- Assess sourcing needs: This step defines the scope and objectives of your sourcing activities.
- Identify potential suppliers: Conduct market research to find suppliers who meet your requirements.
- Issue requests for quotation (RFQs): Issue standardized RFQs to potential suppliers, detailing requirements, timelines, and evaluation criteria.
- Evaluate RFQs: Evaluate and shortlist received quotations against your criteria.
- Negotiate contracts: Enter detailed negotiations with shortlisted suppliers to finalize terms and conditions.
- Execute contracts: Formalize the agreement with the chosen supplier through a legally binding contractual document.
- Monitor performance: Continuously monitor the supplier’s performance through regular audits, reviews, and feedback sessions.
- Contract Management: Manage the entire lifecycle of a contract, from creation and negotiation to execution, amendment, and termination.
Note
To learn more about contract management in SAP S/4HANA, check out "Exploring Contract Management in SAP S/4HANA Sourcing and Procurement" on learning.sap.com.