CPSP: Sourcing

The Sourcing domain tests the structured process of matching a defined need to the best supply option and converting that choice into an agreement. Expect questions on RFx selection, evaluation criteria and weighting, competitive versus collaborative strategies, and total cost of ownership.

The sourcing process

1. Define the need and specification, choosing performance specification where you want supplier innovation and design specification where form-fit-function is fixed.
2. Profile spend and supply market: supplier count, capacity, substitutes, cost drivers, barriers to entry.
3. Choose the strategy: competitive for leverage items, collaborative for strategic items, secure-supply for bottleneck items.
4. Evaluate and select: RFI to test capability, RFQ where the item is fully specified and price dominates, RFP where solution and approach matter.
5. Negotiate, contract, implement and measure realized value.

Making selection defensible

• Set weights before bids are opened; re-weighting after results arrive is the most common challenge point.
• Score every bidder on the same scale, multiply by weight, sum, and keep raw scores auditable.
• Total cost of ownership includes freight, duty, quality failures, inventory carrying cost, transition and disposal, not just unit price.
• Reverse auctions suit commoditized, well-specified, multi-supplier lots; they fail where specification or relationship complexity is high.

Worked example

Two suppliers scored on price 40%, quality 25%, lead time 20%, sustainability 15%. Supplier A: 90, 80, 70, 60 gives 36.0 + 20.0 + 14.0 + 9.0 = 79.0. Supplier B: 80, 95, 85, 75 gives 32.0 + 23.75 + 17.0 + 11.25 = 84.0. B wins despite losing on price. Now test sensitivity: raise price to 55% and drop sustainability to 0%. A scores 49.5 + 20 + 14 = 83.5; B scores 44 + 23.75 + 17 = 84.75. B still leads, so the recommendation survives a weighting challenge. That sensitivity check is what separates a defensible sourcing decision from a purely arithmetical one.

Traps

• Awarding on lowest unit price when TCO reverses the ranking.
• Using an RFQ for undefined scope, so each supplier prices different assumptions and offers cannot be compared.
• Double-weighting a criterion, for example price at 40% plus cost of ownership at another 40%.
• Ignoring switching and transition costs inside the TCO model.
• Running a competitive event with only one credible supplier, which is a negotiation with extra steps.