- Make or Buy Decisions
Make or buy decisions compare the cost of producing a component or providing a service internally with the cost of purchasing the component or the service from an external supplier. The fast changing competitive environment demands greater flexibility and capability to deal with environmental changes and uncertainty. This involves not only focusing on financial or marketing strategies but it may demand careful analysis of all functional or marketing strategies. Many companies are only focusing on what they are good at and outsource the rest.
- Single Sourcing
Single sourcing of an item means that the company adopts the practice of purchasing all its requirements for an item or service from one supplier although a number of suppliers may have the capability to supply. In sole sourcing, only one supplier supplies all goods.
- Multiple sourcing
Multiple sourcing of items means that the company adopts the practice of purchasing all its requirements from various suppliers in the market. The objective of multiple sourcing is to maximize benefits on prices and services. In situations of multiple sourcing both buyers and suppliers feel a high level of uncertainty and therefore there are multiple controls to ensure successful transactions.
- The buyer has a higher bargaining power, due to multiple sources of
- It reduces risk in case of breakdown in production on one supplier, the buyer can rely on other
- Increases supplier responsiveness to variations in
- The buyer benefits from creativity of various
E-sourcing is a suite of collaborative web-based tools that enable procurement professionals and suppliers to conduct the strategic activities within the procurement lifecycle over the internet. These strategic activities including requirements and specification definition, tendering and supplier selection, and contract award and management are designed to deliver value for money procurement solutions the public sector. E-sourcing helps to encourage consistency with policy and best practice and increase sourcing and contract management efficiency and effectiveness.
It is management strategy which an organization outsources major non-core functions to specialized, efficient service providers. The basic objective is normally cost reduction and concentration on core activities.