Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Product Sourcing — Explained + Process
What is product sourcing?
- Product sourcing refers to finding and acquiring products from suppliers to sell.
- Successful product sourcing involves thorough product research, supplier interaction, sample testing, evaluations, and supplier options maintenance.
- Knowledgeable and skillful sourcing agents are essential in assisting companies in locating affordable suppliers for their goods.
What is Product Sourcing?
Product sourcing refers to the process of finding, evaluating, and acquiring products or materials from suppliers to meet the demands of a business or consumer market. This involves identifying potential suppliers, negotiating terms, and ensuring the quality, cost-effectiveness, and reliability of the sourced products.
Effective product sourcing contributes to a company’s ability to offer competitive pricing, maintain product quality, and meet customer demand. It is a critical aspect of supply chain management, encompassing activities such as supplier selection, procurement, and ongoing relationship management to ensure a steady and efficient flow of goods into the business.
The 7 Steps of Product Sourcing
Sourcing for new products can be very exhausting and nerve-wracking. Fortunately, the Internet has enough information online for every procurement manager to read on how to be a champ when it comes to product sourcing. Here are the best and easiest steps on how to be successful when sourcing products:
1. Sourcing strategy
If you are planning to buy a product, you first have to understand that product and the market it will serve. A well-defined sourcing strategy sets the ground rules—budget limits, quality thresholds, lead-time expectations, and ESG requirements—so you do not chase items that will never sell or fit your brand. Think of it as drawing the map before you start the journey.
Beyond setting basic parameters, a mature sourcing strategy also maps total-cost-of-ownership (TCO) drivers (transport, duties, service parts, end-of-life disposal) so teams avoid “cheap-to-buy, expensive-to-own” pitfalls. The strategy should be co-created with finance, engineering, and marketing to balance margin goals with brand positioning, while embedding scenario plans (e.g., tariff hikes, raw-material shocks) that trigger predefined mitigation playbooks.
2. Market Research
Armed with a strategy, dive deep into data to validate your assumptions. Market research reveals price elasticity, seasonal spikes, and gaps your competitors overlook. Skipping this diligence can leave you holding inventory no one wants.
Modern market research layers primary interviews and observational studies on top of syndicated data and AI-mined social-media sentiment to reveal unmet needs and emerging micro-trends early. Interactive dashboards let buyers model demand elasticity under multiple pricing schemes or feature mixes, turning raw facts into “what-if” simulations that sharpen range planning and inventory targets.
3. Request for Information (RFI)
Now, cast a wide net to find out who can play. An RFI gathers high-level details—capacity, technology, certifications—without committing to purchasing management. It screens out vendors unable to meet your baseline needs, saving time later.
An effective RFI uses a weighted-score template (covering capacity ramps, CSR certifications, digital-traceability systems, and cyber-security posture), so answers drop straight into a quantifiable vendor heat-map. Coupled with automated red-flag detection (e.g., sanctions, litigation history), this step builds a defensible audit trail that shows regulators and executives why certain suppliers progressed or were eliminated.
4. Request for Quotation (RFQ)
With the shortlist in hand, ask for hard numbers. The RFQ converts possibilities into comparable offers—prices, payment terms, tooling fees, and samples you can touch and test. This is where cost-to-value ratios become clear.
Leading teams complement the RFQ with should-cost models and standardized cost-breakdown sheets, forcing bidders to expose labor, overhead, and margin assumptions. Side-by-side comparisons surface hidden costs such as packaging waste, inspection fees, or expedited freight, enabling fact-based discussions that go far beyond the headline unit price.
5. Negotiation phase
Enter negotiations equipped with RFQ data and market benchmarks. The goal is not just to squeeze cost but to balance value, risk, and partnership potential. Many buyers secure a trial run here—a small batch that validates performance before a full roll-out.
Negotiations now blend classic levers (volume commitments, payment terms) with collaboration clauses like joint value-engineering sprints or shared inventory buffers. Virtual-twin simulations can quantify how design tweaks or process automations affect both parties’ P&L, turning the conversation from zero-sum concessions into shared-gain scenarios that lock in longer-term stability.
6. Contracting Phase
Once the handshake is done, memorialize every promise in a contract. Document KPIs, SLAs, intellectual-property clauses, and the pilot-order plan. A robust contract transforms verbal commitments into enforceable obligations.
Best-in-class contracts embed dynamic price-adjustment formulas indexed to verified commodity data, plus KPI “ratchet” clauses that tighten targets annually without renegotiation. A clear governance matrix defines escalation paths, quarterly business-review cadence, and data-sharing protocols, while a digital contract-lifecycle-management (CLM) tool tracks every amendment to preserve a single source of truth.
7. Supplier Relationship Management (SRM)
The real work starts after the first shipment. Track on-time delivery, quality scores, and responsiveness while collaborating on improvements and innovation. Keep an active database of alternate suppliers so you can pivot if performance slips or demand surges.
Advanced SRM programs move from reactive scorecards to predictive analytics, using machine-learning algorithms to flag likely OTIF (on-time, in-full) slippages weeks in advance. Joint innovation roadmaps, co-funded R&D pilots, and sustainability capability-building workshops incentivize suppliers to invest in continuous improvement, turning the supply base into a competitive advantage rather than a cost center.
Examples of Product Sourcing
1. Seasonal Local-Farm Produce Program
A mid-sized supermarket chain decides to lock in peak-season strawberries from nearby family farms to differentiate on freshness and support regional agriculture. During January, the category manager forecasts demand using last year’s sell-through curves and schedules rolling deliveries for mid-May to July. She issues a request for quotation (RFQ) to six farms within 150 km, stipulating GLOBAL G.A.P. certification, reusable crates, and pre-cooling within two hours of harvest.
The final framework agreement sets tiered pricing linked to Brix levels and guarantees weekly volume to the top three growers; in return, the farmers commit to real-time crop-status updates via a shared portal. Marketing builds a “Picked Yesterday” end-cap, while logistics arranges cross-dock slots that trim transit to under eight hours, preserving shelf life and cutting shrink by 12 %.
2. Private-Label Mediterranean Olive Oil Line
To capture higher margins, the supermarket launches a private-label extra-virgin olive oil positioned between mainstream brands and premium imports. Procurement begins nine months out, short-listing three cooperative presses in Spain, Greece, and Italy based on 0.3 % acidity, PDO status, and ISO 22000 compliance. After blind sensory panels and cost-in-use analysis, the chain opts for a Spanish cooperative that can bottle under the supermarket’s brand and handle mixed-pallet consolidation.
A multi-year contract pegs price to the ICEX olive-oil index with a ±5 % collar, hedging market swings. The packaging team co-designs a 750 ml dark-glass bottle, while QA mandates full traceability back to grove lot numbers stored on the blockchain-enabled supplier portal. Launch promotions bundle the oil with in-house sourdough and deli cheeses, lifting total category revenue 18 % in the first quarter.
The Product Sourcing Agent Debunked
Behind every product sourcing strategy is the product sourcing agent.
Also called simply a sourcing agent, it’s the responsibility of these guys to assist a company in locating sources for products and supplies at a low price to help the company save money on its production run. Most product sourcing agents represent a single company, or he/she could run a business that serves other companies, too.
Because of the nature and scope of their work, a product sourcing agent is often required to be very knowledgeable in multiple languages, along with a good sense of business and coordination skills.
The average monthly rate for the product sourcing agent is $ 4,913 per month. So, annually, that’s $58,966. But if a product sourcing agent applies maximum effort, top earners are said to have earned $96,500 in a year. Now that’s good money.
Now, before you get all excited, you need to know the requirements and qualifications for how to become a sourcing agent:
- Must have a Bachelor’s Degree in Business or Chemical Engineering.
- Must be able to travel at a moment’s notice.
- Must know global commerce.
- Prior working experience in product sourcing is a must.
- Must have a solid understanding of supply chain management.
- Must be a MASTER NEGOTIATOR.
- Must be confident, a people person, and dedicated
Procurement Expert’s Advice on Product Sourcing
For this article, we asked a seasoned procurement professional to share his insights regarding product sourcing.
Sjoerd Goedhart
Owner, Goedhart Interim Management & Consultancy
LinkedIn Profile: https://www.linkedin.com/in/sjoerdgoedhart/
1. Can you share a personal example of product sourcing? What can readers learn from this?
“As a buyer of food products, I spent a lot of time on product sourcing. Getting to know potential suppliers, and being aware of trends and developments and new developments is an important part of my work. These take time but are essential parts of a good sourcing strategy.”
Follow-up Question: What should procurement professionals avoid
when dealing with product sourcing?
“One common mistake procurement professionals should avoid when dealing with product sourcing is solely focusing on price. While price is important, it shouldn’t be the sole determining factor in decision-making. It’s crucial to consider other factors such as quality, reliability, and supplier reputation to ensure a successful sourcing process. It’s an important point worth highlighting.”
2. What should readers know about product sourcing?
“Product sourcing is an essential part of procurement and a good procurement process. Product sourcing is not something you just do on the side. It requires time, good knowledge of markets where raw materials come from, knowledge of trends and developments, and knowledge of product range groups. Building and maintaining a network with (potential) suppliers is also something you cannot do lightly.”
3. What is the biggest misconception about product sourcing? What do most people get wrong about it?
“I don’t know if it’s doing something wrong, but many procurement professionals attend little to no trade fairs. This is because it takes too much time in all the hustle and bustle and/or you have to travel abroad for it. This is a missed opportunity. A trade fair is an excellent opportunity to meet existing suppliers, meet potential interesting suppliers for a 1st impression, and see trends and test products in a short time. The importance of trade fairs should not be underestimated and this should be a priority within the work of many organizations.”
Follow-up Question: What benefits do trade fairs offer to a procurement professional?
“Trade fairs offer procurement professionals several benefits, including the opportunity to explore new products and market developments efficiently. They also provide a platform to meet potential suppliers and maintain relationships with existing ones. However, when visiting trade fairs, procurement professionals should be mindful of the importance of preparation. Preparation is key, comprising around 80% of the process. This involves planning whom to visit, making appointments in advance, and ensuring that suppliers have allocated time to meet with you. Having a clear agenda and route, perhaps even printing out a floor map in advance, can help streamline the experience. Additionally, scheduling networking sessions and client meetings beforehand ensures that everyone is prepared and available at the designated times. By prioritizing preparation, procurement professionals can maximize the value gained from attending trade fairs and optimize their interactions with exhibitors.”
4. How can companies balance cost, quality, and sustainability in their product sourcing strategies?
“You can balance this to prioritize this in line with the company’s strategy. Set clear priorities and ambitions, and measure and evaluate the progress.”
5. What are some innovative sourcing strategies that have emerged in recent years?
“A strategy that has gained more attention in recent years is bundling the purchasing of raw materials or starting purchasing groups. This has been something that has existed for a long time within food, but we also see this more often in other sectors, partly driven by pressure on companies’ margins, which means that realizing purchasing benefits has become increasingly important.”
6. What tips can you give to other procurement professionals who are sourcing their products locally and internationally?
“Visit trade fairs and visit suppliers as well nationally and internationally. To be present at the site of the (potential) supplier you get the best view of this supplier and the most information to decide.”
7. What should procurement professionals keep in mind when sourcing products internationally?
“There are differences in quality requirements for comparable products per country. For example, within the food ingredients, you must be aware of this. but also, and especially, the cultural differences in international business. These differences exist in the negotiation process of reaching an agreement, but also in differences in negotiation styles and behavior.”
Conclusion
Product sourcing is a multifaceted challenge for procurement managers, demanding a nuanced approach to finding and procuring products for resale.
Despite the seemingly simple definition, the process involves intricate analysis, extensive research, and strategic planning. Procurement managers must not only identify reliable sources for wholesale supplies but also navigate the potential pitfalls of deceptive suppliers.
I want to share that I have created a free-to-download editable procurement process: 7 steps template. It’s a PowerPoint file, together with an Excel file, that can help streamline your product sourcing processes. I even created a video where I’ll explain how you can use this template.
Frequentlyasked questions
What is product sourcing?
Product sourcing is the process of locating suppliers for buying supplies or products for the company.
How to do product sourcing?
A company needs to find suppliers to buy supplies that are needed for the company to operate. Product sourcing is needed to regularly find those suppliers.
How do I become good at product sourcing?
You can become good at product sourcing by undergoing training meant for sourcing.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.