Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Product Sourcing — The Ultimate Guide
Key takeaways
- 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.
Before you continue reading, 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.
Product Sourcing Steps
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. Product research is key
If you’re going to buy a product, then you need to understand the product. This is a sort of golden rule among procurement managers. Market research is essential to success; without it, you run the risk of buying products that will not sell at all. While doing product research, one needs to think of the following key values.
Trends – Always look at trends in the product category and look at how companies deal with the trends.
Store Data – When you look at specific stores, what do the numbers tell you? Are the products interesting enough to keep the store afloat?
Consumer Demand – Finally, check if the products are in high demand. Have a look at what the consumers are asking for. Make sure to get every data available.
2. Get in touch with potential suppliers
Even if you’re not interested yet in making any purchases, getting in touch with potential suppliers is an important step. Yes, we mentioned suppliers.
A wise procurement manager knows that getting only one best supplier is a dumb move; the more cards or suppliers you have, the better your chances of choosing and deciding which one is better than the rest.
Also, keep in mind that products change their value over time. The supplier who is offering the best product at the right price today may change their values the next.
3. Ask for samples
Only a rookie procurement manager doesn’t ask for samples. The best procurement manager is one who knows the advantage of asking for samples. This way, you and your procurement team can have a closer look at the product. After testing it, gather with your team and discuss your findings.
4. Choose a supplier for a trial run
Once a retail buyer finds a product that shows potential, never hesitate to ask for a trial run for the product; this will give you an idea of the number of products that are on a trial run, together with sales ratios and consumer feedback. Also, remember that a buyer can choose certain products for the trial run from the supplier’s overall lineup.
5. Give your supplier an evaluation and decide
After the samples and trial run, it’s time for the procurement manager and his/her team to give their evaluation. Whether or not the company chooses to move forward with the supplier, giving an evaluation is something that both the procurement team and the supplier can appreciate. Check to see if the product achieved the goals you’ve set. Did the product overperform or underperform? How was the product received in stores?
Also, evaluate how well the procurement team communicated with the supplier.
- Did the products arrive on time?
- Were concerns addressed by both teams without problems?
- Were the products in good condition when they arrived?
The following evaluations will give you and your team ideas of how to move forward with product sourcing. Never hesitate to evaluate all suppliers after the production run.
6. Keep your options
What we mean by this is that you need to come up with a list or database of other suppliers that you can potentially communicate with in the future.
Keep your lines open. You’ll never know if one of those potential suppliers may suddenly turn up with some good products. Also, if in case your present supplier suddenly closes down or experiences bad luck with the business, then you have alternate sources for the supplies that your company needs
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.
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.
