Network sourcing is a strategic approach in business operations, particularly concerning supply chains.
Understanding Network Sourcing
Based on the provided concept, network sourcing is the idea that it is possible to create a virtual company at all levels of the supply chain.
Key Components
This approach relies on specific methods to achieve this virtual structure:
- Virtual Company: It involves operating as if you were a single, unified company, even though the various functions and stages are performed by different, independent entities.
- Across the Supply Chain: This virtual structure is intended to span all levels of the supply chain, from raw material sourcing through manufacturing, distribution, and potentially even final customer delivery or service.
- Engineering Partnerships: The creation of this virtual entity is achieved by engineering multiple-tiered partnership relationships at each stage. This means carefully designing, establishing, and managing complex collaboration networks with various partners at different levels.
- Alternative to Vertical Integration: A crucial distinction of network sourcing is that this is accomplished without moving to vertical integration. Unlike vertical integration, where a single company owns and controls multiple stages of the supply chain, network sourcing relies on collaboration and strategic alliances among independent partners.
Essentially, network sourcing allows organizations to build a highly integrated and coordinated supply chain network through strategic alliances and partnerships, enabling the flexibility and specialized capabilities of external partners while achieving the seamless operation typically associated with a single, integrated company.
