Types of Product Sourcing Strategies
- Direct sourcing
This involves purchasing products directly from the manufacturer or producer. If the company is unduly dependent on a single supplier of items, this might be a dangerous but cost-effective choice.
- Indirect sourcing
This involves purchasing products through intermediaries, such as wholesalers or distributors. This is a more expensive choice, but it provides greater freedom and a bigger selection of items.
- Drop shipping
This is a strategy where the business does not only keep goods in stock but instead transfers customer orders. As well as shipment details to either the manufacturer or wholesaler, who then ships the goods directly to the customer. This can be a cost-effective option for businesses with limited storage space or capital.
- Reverse sourcing
This involves purchasing products that have been returned or overstocked by other businesses. This can be a cost-effective option, but it can also be risky if the products are damaged or out-of-date.
- Strategic sourcing
This involves taking a holistic approach to product sourcing, considering factors such as cost-effectiveness, supplier capabilities, and market trends. This strategy is often used by larger organizations with a wide range of products and a complex supply chain. It involves collaboration and partnership between the organization and its suppliers. Moreover, it can help to reduce costs, improve supplier performance and increase the overall efficiency of the supply chain.
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