What is the definition of "external sourcing" in procurement?

The correct definition of "external sourcing" in procurement refers to obtaining goods from suppliers outside the organization. This process typically involves identifying and engaging with vendors that are not part of the company’s internal operations to acquire various products or services needed for business functions.

External sourcing is crucial for organizations as it allows access to a broader range of goods, often leading to better pricing, enhanced quality, and innovative solutions that might not be available internally. It also enables companies to focus on their core competencies by outsourcing non-core functions and leveraging the specialized expertise of external providers.

In contrast, finding new suppliers within the company refers to internal sourcing, which involves utilizing existing resources or departments rather than sourcing externally. Acquiring resources from internal departments is also about leveraging in-house capabilities rather than looking outside the organization. Using only local vendors for procurement restricts the sourcing to a specific geographical area, which is not a requirement of external sourcing, as it can involve suppliers from any location.