How to Source Products? Strategic Sourcing explained (Case studies of Walmart, Ikea and Zara)

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The practice of researching a company's and its suppliers' spending profile is known as sourcing.
This aligns with the needs of the company and those of its suppliers.
Sourcing of products is a method for evaluating and improving a company's purchasing activities on a regular basis. It is an institutional procurement procedure.
Sourcing builds supply chains that are not only the lowest cost but also the lowest cost overall.

Sourcing – Case Studies

For over 35 years, IKEA has employed Indian suppliers for its global operations. It works with about 60 manufacturers and 4 million people in the supply chain.
IKEA is also involved in working with social entrepreneurs and getting close to 1,200 local artisans involved in creating one-of-a-kind collections for their worldwide stores.
IKEA’s supply chain in China represents 38 percent of its global productivity in volume.
From its entry into China 30 years ago, IKEA has grown into a company with product development, production and retail, owning 30 retail outlets, and more than 400 furniture and home furnishing suppliers and service providers on the Chinese mainland, creating nearly 1 million jobs.

Nike
Nike has over 700 factories around the world. Each item travels from 57 distribution centers across a network of 18,500 accounts and 140,000 retail doors.
However, Nike does not own any footwear or apparel manufacturing facilities; these account for roughly 88% of its revenue.
Instead, the manufacturing process is outsourced to third parties due to the benefits of doing so.
Independent contract manufacturers operate numerous factories and produce Nike's footwear outside the United States.

Zara uses a “Make and Buy” approach
Zara produces the more fashionable and riskier items (which need testing and piloting) in Spain
It outsources production of more standard designs with more predictable demand to Morocco, Turkey and Asia to reduce production cost.
The more fashionable and riskier items (which are around half of its merchandise) are manufactured at a company-owned factories in Spain, Northern Portugal and Turkey.
Clothes with longer shelf life (i.e. the one with more predictable demand patterns), such as basic T-shirts, are outsourced to low cost suppliers, mainly in Asia.

Walmart
Walmart has been associating with Indian suppliers for more than 15 years. India is already known as one of Walmart's major sourcing countries, with annual exports worth about $3 billion.

Through the Bangalore Global Sourcing office, which was established in 2002, India-made apparel, homeware, jewelry, hardlines and other popular items are now available to customers in 14 markets such as US, Mexico, Canada, Central America and UK.
In the year 2020, Walmart made a decision to purchase $10 billion of Indian-made items each year by 2027.
The new export aim for Walmart is to help small, medium, and large businesses (SMEs) in India grow.
Flipkart Samarth and Walmart Vriddhi supplier are two simultaneous development initiatives.
Why is Strategic Sourcing important for your Business?
Ideal Suppliers are Optimized
It's critical to assess a supplier's fundamental skills, their profiles, and so on.
This allows for strategic sourcing in the corporate environment.

Relationships with Suppliers are built in the Long Run.
Strategic sourcing helps an organization develop long-term connections with its suppliers.
A long-term connection demonstrates to suppliers that they are significant and considered in many purchasing decisions.

Higher Degree of Cost Savings
The most apparent benefit that businesses receive from strategic sourcing is cost savings.
Firms must search for and select suppliers who offer the best value at the right price.

Lowers the Risk Involved
Beyond compliance checks, strategic sourcing lowers risk in the supply chain. Organizations sometimes have a pre-vetting procedure. It examines a supplier's financial stability as well as the company's responsibility.

Objectives for Business and Sourcing are more consistent
Sourcing in an organization must be in line with corporate goals. This is the crux of strategic sourcing.

Strategic Sourcing Process
• Identifying the Sources of Supply
• Contacting and Evaluating the Sources of Supply
• Negotiating with the Sources of Supply
• Placing the Purchase Order
• Establishing Vendor Relations
• Analyzing Vendor Performance

This video is on Sourcing of Products and it has the following sub-topics.

Time Stamps

0:00 How to Source Products?
0:16 Sourcing of Products
0:44 Sourcing – Case Studies
3:31 Why is Strategic Sourcing important for your Business?
4:41 Strategic Sourcing Process