PurchTips - Edition # 195

 

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Picture of Charles Dominick, SPSM, SPSM2, SPSM3

Sourcing Decisions: How To Support Them

By Charles Dominick, SPSM, SPSM2, SPSM3

What Do Good Sourcing Recommendations Include?

When you are leading a sourcing project but the ultimate decision is going to be made by an executive not involved in the day-to-day sourcing activity, you must be able to provide a recommendation that addresses the executive's interests.

What are executives interested in? To simplify it, profits and risk. So, your recommendation should answer the questions: "Why is this sourcing decision the one with the most favorable effects on our organization's profits?" and "Why is this sourcing decision the one that represents the least risk for our organization?"

When addressing profits, you can point out any of the following that apply:

  • How the recommended supplier's price is lower than other alternative suppliers
  • How costs beyond just price (e.g., energy usage) are lower than those of alternative suppliers
  • How your organization can be more efficient (e.g., require fewer employees) by choosing the solution of the recommended supplier as opposed to those of alternative suppliers
  • How your organization may increase revenue more by choosing the solution of the recommended supplier as opposed to those of alternative suppliers

When addressing risk, you can point out any of the following that apply:

  • How the recommended supplier is more financially stable than alternative suppliers, using widely-accepted ratios of financial health
  • How the recommended supplier has more market share in your specific industry and, therefore, is more likely to be able to handle any challenges that are unique to your industry than alternative suppliers
  • How the recommended supplier has proven its ability to perform through real-world case studies, trade publication articles, references, and other forms of evidence

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Are you tired of not getting enough opportunities, respect, and money out of your procurement career? Well, guess what? Nothing will change unless you take action towards becoming a world-class procurement professional.

Earning your SPSM® Certification is the action to take if you want to bring the most modern procurement practices into your organization and achieve your career potential. Download the SPSM Certification Guide today to learn how to get started on your journey to a more rewarding procurement career!

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