THE IMPACT OF MATERIAL SOURCING IN ENHANCING ORGANIZATIONAL PROFITABILITY
Definition of Sourcing (Material Sourcing)
According to Hassan (2010) define sourcing as a purchasing procedure through which buyers, sales, survey and evaluate suppliers and determine policies relating to those who will most suitable meet the requirement of the organization (p. 99).
Lysons and Farington (2006) define sourcing as the process of identifying, select and developing suppliers key purchasing activities. Sourcing can be either tactical and operational or strategic buds (p. 367).
According to Hassan (2010), sourcing decision is arguably one of the most important purchasing decisions to be made by managers. It is generally believed that once a “correct’ choice of supply source is made, then needs of the organization would be met. He went on to say that, a lot of factors are considered in making sourcing decision.
- Which product or services best fit needs or whether to produce what we consume or to buy from outside supplier – make or buy.
- Whether to lease or buy, if we are to buy, do we buy locally, nationally or internationally?
- Do we use or buy from one supplier (single source) from several (multiple source).
- Do we enter into partnership or engage in reciprocal agreements, negotiation or bidding and to buy from distributions or direct from manufacture.
Hassan (2010) posits that sourcing decision is arguably one of the most important purchasing decisions to be made by managers. The stated that it is generally believed that once a “correct” choice of supply source is made then need of the organization would met adding that this state over simplifies a very complex situation. He further stressed that a lot of factors are considered in making sourcing decision. But the question that must be addressed by the purchasing manager is which products or services best fit needs or whether to produce what we consumer or buy from outside suppliers (make or buy) another issue is whether to lease or buy. If we are to buy, do we buy locally, nationally or internally? Do we make or buy from one single or multiple suppliers? Again, do we enter into partnership or engage in reciprocal agreements, negotiations or biding and to buy from distributors or direct from manufacture.
Companies need to decide whether outsource or insource; the decision to outsourcing or insourcing is generally a sort of make or buy decision. In order to concentrate on strategies of the firms activities, organization must let go of non-core areas while insourcing is still a main stay in some organization, outsourcing has become increasingly popular with others as they seek to cut down cost, effort and time taken to complete a business process.
According to Hassan (2008), outsourcing “is the process by which an organization contracts out services and operations that are usually conducted in house to other firms that can do better or perform well, cheaper and faster by contract”.