- How well does your organization know how to source correctly according to your negotiated agreements?
- What is your communicated policy of how to buy products and services in your company?
- How much cost could you have avoided if you decrease the number of purchases in your company?

The Sourcing Policy
The sourcing policy is one of the most important tools to control the purchasing work in any organization. With a clear policy everybody in the organization knows how to buy correctly, from which suppliers, what terms to use, what process to follow and the code of conduct with the suppliers. A sourcing policy typically contains:

· General guideline: when should a sourcing professional be involved and when can the line organization do the sourcing event themselves?

· Are we clear about what we want and have we documented it in a clear requirement specification? What do we want to buy?

· What is the code of conduct when engaging with suppliers?

· From which suppliers could we source the product or service we want to buy?

· Checkpoint if we have non disclosure agreement in place and if it is necessary

· How to do a financial check of the suppliers we want to contact

· Any trading history with the supplier? Maybe we are in a conflict or legal dispute?

· When and how to create a Request For Quotation and how many suppliers we should send it to? Which suppliers should we send to (link to Preferred Supplier List)

· How to prepare and perform negotiations

· Who is the final approver of the supplier selection and sourced product or service?

· How to close the deal and sign contracts (link to legal templates)

To have a working and communicated Sourcing Policy leads to:

· To get the best price and quality

· To use the existing preferred supplier lists available in order to decrease the number of used suppliers and utilize already existing agreements

· To make sure that your company is legally protected

· To have a professional approach to your suppliers

· To get increased cost control

· Avoidance of long discussions around why and how to source (a Sourcing Policy is very helpful and timesaving for middle managers)

Common pitfalls

- There is no sourcing policy in place meaning there is a high risk of buying unnecessary products and services leading to increased costs

- There is no Preferred Supplier List connected to the sourcing policy meaning the organization does not know what suppliers to contact. This leads to inefficiency and a growing supplier list leading to increased total costs

- It is not stated how to engage with the suppliers meaning the organization might send Request For Quotation to only one supplier – without competition it is impossible to understand if you are paying the optimal cost for your product or service

- No sourcing policy for purchasing of indirect material & services often leads to less control of what has been purchased, from whom and also to what price. This also leads to unnecessarily high level of administration of wild invoices and/or large amount of travel claims.