Whether your organization sources components, goods, or services, and regardless if they are sourced from around the world or across the country, the practice of sourcing requires significant changes to the way you conduct business.

Finding a reliable, high-quality supplier, while vital, is just one of the challenges. Companies must address a myriad of factors when developing sourcing strategy to ensure that the benefits will outweigh the risks.  Most of the issues that will determine your sourcing success are found within your own organization.

Ensuring Productivity
Companies that embark on sourcing endeavors must typically undergo significant transformations in organizational structure and performance measurements.  If offshore sourcing is your organization’s decided direction, you may need to resolve when and how to use third parties and intermediaries.  Otherwise, direct sourcing will require the cultivation of special internal talents and teams, particularly in the areas of procurement, quality assurance, and logistics.  Three important issues must be considered at the beginning of any sourcing decision to help ensure that productivity remains strong:  maintain inertia at company headquarters, build capabilities, and guarantee quality control.

Maintain Inertia at Company Headquarters
Keeping the big picture in focus may be your greatest internal difficulty.  Employees at different levels all may have a different perspective about sourcing.  It is the responsibility of management to establish strategy, communicate with employees, and create buy-in.  Part of communication includes listening to the concerns of your managers.  To help facilitate the adoption of sourcing strategy by your employees, a transformation of organizational structures, incentives, and performance measures may be necessary.  In addition, leaders who actively engage managers and staff in creating solutions to sourcing dilemmas can help lesson the pain of change and construct a stronger foundation for sourcing success.

Build Capabilities and Guarantee Quality Control
Organizations must put actions and plans into place that seek to minimize potential disruptions.  Manufacturers with overseas sourcing partners, for instance, should become intimately familiar with changing U.S. Customs regulations and be prepared for full compliance at all times.  Companies may also find it wise to develop alternative sourcing options and identify secondary suppliers as a prudent contingency move.  Quality assurance and control measures must be firmly established and may require new sets of internal capabilities and resources.  The same is true of cultural and language aptitudes if sourcing partners are located in other countries.

Assessing Opportunities
The move to improve quality and lower costs has compelled companies to seriously evaluate the prospect of sourcing.  Once executive management recognizes that utilizing sourcing opportunities as part of the manufacturing process will require internal changes, it is then essential to carefully plan and assess what sourcing options will fit your organization’s needs.  Such efforts don’t always take the form of expansive overseas production, and may result in only small fragments of an organization’s products or services being sourced elsewhere.  Regardless of the scope, it is important to take all possible factors into consideration when scrutinizing any sourcing opportunity.

Organizations must first explore their true needs, objectives, and strategies, and determine whether sourcing is really the right remedy.  Manufacturers should also reconsider the basics of their supply chain equation.  Labor may be cheaper in Asia, but Mexico may offer shorter cycle times.  Take the time to assess both sourcing and production locations, and identify what is truly important to your organization’s overall effectiveness and to your ultimate product and service outcomes. 

To Capture the Benefits, Take Care of the Fundamentals
Sourcing can be an invaluable source of competitive advantages.  Or it can be a disappointing source of expense and waste.  Before your organization makes the move, or even if you’re already wading in the sourcing pool, take the time to thoroughly examine the issues and be well prepared to make the organizational changes necessary for success.