How to define a Sourcing Group ?

The very first stage to go through when conducting a Strategic Sourcing program is to define or refine which items are to be included in a Sourcing Group. It is the first of 4 analysis to be performed when ‘profiling a Sourcing Group‘ (Strategic Sourcing Step 1):

  • Defining Sourcing Groups
  • Analysing Sourcing Group Characteristics
  • Understanding Sourcing Group Markets
  • Analysing potential evolution of the Sourcing Group Characteristics and Markets or substitution products/services

So, how do you define a Sourcing Group?

Let me first remind what a Sourcing Group is:

A Sourcing Group is a Group of purchased goods/products/services that are likely to be sourced from the same set of suppliers, partially or fully, using the same purchasing strategy

The way to identify a Sourcing Group consists in validating one or several of following 6 criteria:

  • Similar supplier source
  • Similar production processes
  • Similar use or purpose
  • Similar material content
  • Similar specifications
  • Similar technology

Once you have defined your Sourcing Groups, you can proceed with collecting data to qualify your Sourcing Groups. In a next post I will remind you what data are interesting and where to find them.

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