A source of supply defines how or where a product is procured. When a procurement proposal is created, the source of supply to be used is determined automatically or interactively. The system uses this source to create the procurement proposal.
A distinction should be made between the procurement types external procurement and in-house production. In the location product master, using the procurement type, you define whether a product is produced in-house or procured externally, or whether both are permitted. There are specific source of supply types for each procurement type: