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When Does Product Sourcing Become Ideal for an Organization?

Guest Contributor on Jan 10, 2017 1:00:00 PM

011017.jpegPrime Advantage has invited industry experts to share their insights on the present and future of manufacturing success. In this post, Shruti Agrawal, Director at Excella Worldwide, discusses how to be more strategic with product sourcing.

A lot of companies outsource services for a host of benefits, and product sourcing works on similar grounds as that of sourcing customer service, as well as operations. Product sourcing is much like outsourcing, but what is being procured from overseas is a product or products manufactured by partnered wholesale companies.

How this works is that the parent company, usually with the help of hired agents and procurement specialists, narrows down appropriate suppliers or manufacturers, and hands over the control of their product line to them.

By placing an order with manufacturers based in low-cost countries, they can later offer the imported product line attained at conserved costs and time, to efficiently sell to their client base. Due to significant cost savings on best quality products, companies are now also sourcing raw materials and equipment they require for business operations, or manufacturing finished products.

The following points shed light on when an organization is ideally ready to venture into product sourcing:

When the product requires expertise

Certain products require expertise to develop, and chances are that not every member of the organization has what it takes to deliver. Outsourcing the procurement of these products to a sourcing agent or a procurement company, with a vast network of vendors who have the required expertise, then becomes necessary.

When there is a lack of resources to meet the product requirement

Product development has numerous stages, and each stage involves the use of certain resources in order to complete working on the development of the product in question. Sourcing from manufacturers equipped with the resources to handle this is a valuable solution to the problem.

When manufacturing the product is highly expensive

Organizations can save tremendously on their overhead costs by outsourcing their product development to wholesale manufacturers, and hiring a sourcing specialist to find the right fit. This specifically helps in order to eliminate extra spend when products are highly expensive to manufacture in-house.

When the organization is aiming to offer something unique to their clients

When organizations are looking to offer something unique to their clients, e.g. authentic Chinese crafts or one-of-a-kind furniture, then turning to sourcing agents could be just the medicine they need. Since procurement agents have the contacts and know-how of the local market, they can locate the most unique offerings at the best rates.

Why Do Organizations Outsource Procurement?

The following are the main reasons why organizations choose to hire a sourcing agent:

Lower Operational and Labor Costs

By outsourcing product procurement, an organization can drastically lower its operational and labor costs. This not only helps save time and money, but also focuses the company’s energy into other departments that require attention.

Leverage Global Edge

Different markets all over the world offer all kinds of products, and incorporating the skills to find them is tough for organizations that lack the expertise. Sourcing specialists enable them to offer to their markets what’s available in another part of the world.

Extend Reach to New Markets

Outsourcing products through sourcing agents in different parts of the world helps to develop connections and extend reach to different markets with competitive offerings.

Conserve Resources

Whether an organization is large or small, it values its resources. Organizations are constantly trying new means to utilize resources to the best of their abilities. Sourcing cost-effective products is a great way to conserve resources at hand and offer up a wider range to clients, no matter how small the team.

Industry insight drives operational cost savings

Topics: Supply Chain, Strategic Sourcing, Procurement

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