What Is Corporate Sourcing?
Corporate sourcing is a purchasing approach that involves combining the demand for various goods and services used throughout the organization and using that collective demand to secure those products in bulk. The result of this type of effort is that the overall cost of operation for the company is minimized, allowing the business to realize a larger amount of net profit from the production effort. Typically, corporate sourcing will require the creation of some type of central purchasing process that involves coordination with personnel in each department or location of the business. This type of sourcing network aids in identifying the level of demand for different goods and services in each part of the company, working with suppliers to meet that demand, and negotiating volume pricing that saves the company money.
Businesses of just about any size can benefit from utilizing the basics of corporate sourcing. A small company that operates a single location can use this approach to keep the costs of office supplies to a minimum by identifying the total monthly usage of all employees for items like copy paper, pens, printer ribbons and pads of paper. An office manager or other authorized employee will then negotiate with a local supplier based on that monthly volume usage to secure a discount on the standard pricing for those items, sometimes entering into a contractual agreement to lock in those lower rates. This allows the small business to obtain the office supplies that are consumed regularly at a lower cost, which in turn means that more of the income generated by the company is retained as net profit.
Larger corporations with multiple locations will often create a purchasing department as part of the corporate headquarters structure. This department works with each location to assess usage on different goods and services, combines the totals for all locations, then seeks to negotiate bulk discounting agreements with various vendors. When this approach functions efficiently, the operating expenses associated with each location within the company structure is kept to a minimum, allowing the business to retain more of its revenue stream as profit.
As with many business and strategic efforts, corporate sourcing is an ongoing activity. Purchasing agents constantly seek greater discounts on goods and services routinely used in a business operation. Monitoring usage is also important, since a change in the volume of purchases associated with a particular item may open the door to negotiating greater savings. As a means of enhancing the ability of a company to receive the greatest utility from its purchases, corporate sourcing is an approach that is practical and will often produce results in a very short period of time.
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