Some organizations may adopt a strategy that dictates the use of suppliers only in

very specific and limited circumstances, while another organization may choose to
make extensive use of suppliers in product and service provision. A successful
sourcing strategy requires a thorough understanding of an organization’s objectives,
the resources required to deliver that strategy, the environmental (e.g. market)
factors, and the risks associated with implementing specific approaches.
There are different types of supplier relationship between an organization and its
suppliers that need to be considered as part of the organization’s sourcing strategy.
These include:
Insourcing The products or services are developed and/or delivered internally by
the organization.
Outsourcing The process of having external suppliers provide products and
services that were previously provided internally. Outsourcing involves
substitution, i.e. the replacement of internal capability by that of the supplier.