Supplier sourcing : the secrets of a strategic process

In increasingly complex and uncertain markets, and with the evolving role of procurement professionals, supplier sourcing has become a strategic pillar for Procurement departments. It is no longer just about finding partners and optimizing costs: today, it is a continuous, methodical process aimed at ensuring your company’s competitiveness and long-term sustainability.

Leverage insights from Fluxym’s experts to turn supplier sourcing into a performance driver.

What is supplier sourcing?

Supplier sourcing is much more than a cost optimization exercise—it’s a strategic process that ensures your organization secures the right goods and services, from the right partners, under the right conditions.
At the heart of procurement and supply management, effective sourcing follows three essential steps:

• Identifying suppliers who meet the specific needs of the business;
• Collecting the information required to assess and benchmark them;
• Selecting the most suitable partners to build long-term value.

While cost remains an important factor, today’s sourcing strategies also weigh product and service quality, supplier reliability, capacity for innovation, lead times, and adherence to legal and environmental standards.

Supplier Sourcing: A Strategic Lever for Both Direct and Indirect Procurement

Designed to meet all of a company’s product and service needs, supplier sourcing applies to both major procurement categories.

Direct Procurement

This includes raw materials and components that are integrated into your company’s production process or final product—everything essential to delivering your core business offering.

Indirect Procurement

Indirect procurement covers the goods and services that support the company’s operations, as well as non-production investments. It includes two categories.

• Class B purchases ensures smooth business operations without being at the core of the production process. This includes general services (e.g., facility management), IT equipment and software, business travel, marketing, and advertising.
• Class C purchases covers everything else: furniture investments, office supplies, hygiene products, and other general expenses (CAPEX and OPEX).

Supplier Sourcing vs Procurement : What’s the Difference?

Both terms refer to distinct but complementary stages of the procurement process.

Supplier sourcing takes place upstream. Its goal is to anticipate the company’s needs and meet them by selecting a supplier based on predefined requirements. These criteria include not only the intrinsic characteristics of their offerings (price, quality, etc.) but also other aspects of their operations, such as their CSR commitment.

Procurement, on the other hand, occurs after the supplier has been selected. It covers:

• Order Management
• Delivery Management;
• Supplier payments.

The Supplier Sourcing Process: A One-Time or Regular Approach?

Supplier sourcing can be initiated when a specific business need arises that the current supplier panel cannot meet.

Some companies are more proactive: they conduct supplier searches independently of an immediate need in order to maintain a pool of qualified suppliers. This ensures greater flexibility and responsiveness in case of issues or future requirements.

Sourcing Priorities: Aligning Supplier Oversight with Purchasing Goal

Sourcing is no longer just about negotiating the lowest price.
As companies face mounting economic, regulatory, and strategic pressures, sourcing has evolved into a core function—one that plays a decisive role in procurement performance and risk management.

Here are the four key areas where sourcing delivers impact.

#1. Spend Management: A Continuous Priority

This has always been the primary goal of supplier sourcing: spend management. This involves price negotiations… but not only that. Buyers must also:

• Conduct competitive monitoring and continuously track market developments to identify opportunities and cost-reduction levers;
• Anticipate unexpected cost increases, shortages, and the emergence of new needs by identifying emerging trends and risks of disruption in advance.

#2. Avoid regulatory and compliance risks

Numerous standards and regulations govern business activities – and some extend to their suppliers. These regulations are becoming increasingly strict, requiring companies to purchase materials that meet the technical, safety, or health standards specific to their industry.

This also includes ESG (Environmental, Social, and Governance) factors. Facing societal and climate challenges, companies are required to work with partners who follow responsible practices, such as reducing their carbon footprint or respecting social rights. The goal: promote responsible procurement.

Are suppliers approved? Do they have the required certifications? Do their products and services comply with current standards? Verifying this information is the responsibility of the Procurement department.

Supplier sourcing plays a vital role by enabling procurement teams to assess potential partners based on non-commercial criteria.
This approach is just as critical when addressing a new business need as it is when anticipating potential non-compliance from an existing supplier.

#3. More suppliers, less risk

Supplier diversification is key to ensuring continuity. In an unstable global context, having multiple trusted suppliers protects your business from unexpected breakdowns.

#4. Challenge Your Suppliers to Keep Delivering

Even trusted vendors need to be assessed regularly.
By fostering healthy competition, you ensure they stay cost-effective and performance-driven. And by actively sourcing new suppliers, you keep your options open to innovation and improvement.

How to source your suppliers?

Selecting and securing the best partners requires a structured and methodical approach. Discover our 5-step methodology.

#1. Needs analysis

Your buyer thoroughly analyzes the needs expressed by the internal client. They clarify the specifications, including technical requirements, quality standards, quantities, and delivery timelines.

Based on this analysis, and taking into account the company’s broader priorities such as budget constraints and ESG criteria, they define the supplier selection criteria: pricing, proposed innovations, production capacity, logistics capabilities, and more.

#2. Supplier Sourcing

The buyer then focuses on identifying potential suppliers. This can be based on:

• An existing panel of partners;
• Research at trade shows;
• Word of mouth;
• Specialized supplier databases.

#3. Supplier Evaluation

Shortlisted suppliers are evaluated based on financial, technical, regulatory, and innovation-related criteria.

Beyond their ability to meet the company’s needs, the assessment includes a thorough risk analysis, covering financial health, legal standing, compliance, and creditworthiness (revenue, profitability, etc.). This evaluation is often supported by tools such as Altares or EcoVadis, either directly or through Source-to-Pay solutions. The buyer also ensures that the supplier complies with current regulations and standards, including environmental requirements.

To do so, the buyer may send, at different stages of the process:

• an RFI (Request for Information),
• an RFQ (Request for Quotation),
• an RFP (Request for Proposal),
• or any other relevant, specific request.

#4. Negotiation and contracting

During this phase, the Procurement department and the potential supplier negotiate the contractual terms, including financial aspects and performance commitments. Once an agreement is reached, the contract’s terms of implementation are defined, and it is signed.

#5. Monitoring and performance evaluation

The first orders have been placed and fulfilled: it is time to measure supplier performance. The Procurement department establishes KPIs (key performance indicators) to evaluate:

• Service quality;
• Adherence to deadlines;
• Compliance with contractual commitments.

Our best practices for successful sourcing

Gather Key Insights Before You Commit

Your company is about to engage with an unfamiliar supplier. To secure your choice, gather as much information as possible before committing.

• Ask for references.
• Contact other clients.
• Check their financial data to ensure the reliability of both the supplier and their subcontractors (tier 1, 2, and 3 suppliers).

Integrate AI into your supplier sourcing process

Artificial intelligence (AI) simplifies buyers’ work by centralizing key information. Some tools allow you to aggregate supplier data, keep it updated, and conduct simple and effective monitoring. AI also helps buyers track competitor or international trends and quickly access information whenever a new need arises.

To maximize the impact of your sourcing on your Procurement department’s activities, combine these efforts with the use of a dedicated information system (IS). These tools allow you to:

• Centralize information;
• Ensure full traceability of processes;
• Maintain a detailed history of supplier relationships, whether they involve active partners, prospects, or blacklisted companies.

E-Sourcing: digitalizing supplier sourcing

E-Sourcing tools are designed to improve Procurement Management. Here are the three key benefits

• Time savings

Centralized data and a comprehensive overview, process automation, and more. These tools allow buyers to significantly reduce the time spent on sourcing for and selecting suppliers, thereby lowering costs!

• Enhanced collaboration

Your procurement team and internal stakeholders can instantly access up-to-date information. This shared visibility improves coordination, especially critical when reviewing RFP responses or aligning on supplier evaluations.

• Improved supplier relationships

E-Sourcing tools provide a dedicated supplier portal. Suppliers can access a structured overview of the business relationship and find various administrative documents (contracts, RFIs, RFQs, and RFPs). The result: greater transparency, lower risks, and easier implementation of mutual improvement plans. Supplier contributions are recognized, and relationships are strengthened.

Buyers are under increasing pressure to select the best suppliers. It’s unavoidable: sourcing, the first step in the procurement process, is becoming more strategic due to today’s shifting geopolitical and economic landscape.

Current tensions in global supply chains mean that suppliers are in a stronger position to choose who they want to work with.

In this environment, buyers must be especially vigilant in their selection process and work closely with their business partners, goals that a well-executed sourcing strategy can help achieve.

While cost reduction remains a priority, environmental and regulatory considerations have become non-negotiable. These criteria must be assessed through a dedicated process and the right digital solution.

• E-Invoicing
• Procurement Optimization
• Project Management
• Supplier Management