Sourcing Strategy

Summary of ArticleOutsourcing is the practice of contracting an outside third party agent to take over specified functions. As Jones (2006) suggests, the potential benefit of knowing when to outsource is a very high return on investment, however, a company should understand the strategic rationale for outsourcing through the sourcing model, pursue a sourcing strategy that aligns with the company strategy and acknowledge the scenarios under which outsourcing is undesired.

In order to understand the strategic rationale for outsourcing, Jones (2006) urges that the company should consult the sourcing model. The sourcing model consists of five focuses and they are :1. Company Strategy2. Function Inventory3. Sourcing Strategy and the Decision Matrix4. Sourcing Requirements and the Request for Proposal (RFP)5. Solutions InventoryThe sourcing model is used as a framework to build a sourcing strategy as well as foster discussion on outsourcing scenarios, hence, the company should assess the five focuses and document their findings from all assessments.

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The first focus in the sourcing model is company strategy. The company strategy is the foundation of the sourcing model. The company must have a clear company strategy because it determines different strategic rationale to incorporate and different priorities that will influence the outsourcing decisions. The company strategy also helps to phrase the corporate goals using the context of outsourcing. The rationale in this focus is to document the company strategy clearly and without ambiguities.

The second focus in the sourcing model is function inventory. The company must fully assess and document its own capabilities, skills and knowledge before outsourcing any function. The documentation is then used to determine the gaps between the actual performing level and the desired level. In addition to the gaps and shortfalls, the documentation is also used to identify internal excellence and outstanding performance within the company. Most...