Direct Sourcing

Direct sourcing

Direct sourcing can be used in various contexts within procurement and supply chain activity. For example, it can be used to identify: 

• A direct route to scoping the market to identify critical suppliers, without using a third party or agent who acts on behalf of the manufacturing site, so enabling the procuring organisation to deal directly with the source supplier without paying increased costs that may be added to the process by third parties/agents.
• Secondly, direct sourcing can refer to materials that are sourced to be used in the manufacturing process, rather than indirect sourcing where the goods or services are sourced as a need to support the production process.
• Finally, direct sourcing can be used quite extensively within the HR area of category management, where the procurement category manager will look to go direct to the market to recruit new talent rather than working with a third party such as a recruitment agency.

What are direct sourcing techniques?

Direct sourcing incorporates many techniques to enable you to source the right supplier for your organisation. Look below at some ways that will help you when direct sourcing.

• Use your brand:
  For you to attract suppliers, they’ll need to know and understand your brand. Use your brand to attract the best suppliers and curate them into the pool of suppliers until you’re ready.
• Store supplier information digitally:
  Create separate categories for your potential suppliers based on different skills. This helps you to collect information on that supplier, so when needed, you can easily source from the best suppliers.
• Select and adopt the right technology:
  Technology is at the heart of direct sourcing. It enables you to curate talent pools that will help you pick the right supplier and avoids you having to go through the selection process repeatedly.
• Communication:
  When embarking on your direct sourcing journey, it’s important to involve people at all levels within your organisation.

How is direct sourcing different to outbound sourcing?

The way organisations source goods and services can have a significant impact on costs, quality, and production. Direct sourcing means you’re going directly to the source to procure goods or services you need for your organisation. Instead of reaching out to a third party, you have the freedom and independence to find the right suppliers that meet your objectives. You’ll have independence when getting suppliers to submit a bid, communicate their capacity and production/service level capabilities and you’ll be able to onboard them directly. You’ll find that you have more control over your supply chain and the management of it.

Outbound sourcing is involving a third party to select the suppliers. This means you’ll often pay them a fee when they hire the right supplier. However, although it may seem less time consuming than direct sourcing, you’ll still be dealing with the third party directly and keeping on top of what they’re doing. You’ll also have to ensure that the third party understands your business objectives and what you’re looking for in a potential supplier, so making sure the third party has a good reputation in sourcing the best candidates is crucial.

How does direct procurement differ to direct sourcing?

Direct procurement is an end-to-end process, that involves acquiring the essential products and services that make their way to the end customers. It can include the products, suppliers, goods, and services. Direct sourcing is a core activity within procurement and involves the search of suppliers fit for the organisation.