One of the most critical design choices in Strategic Sourcing is the pricing basis, i.e. the “price per what” issue. Most frequently, item or catalog pricing is employed, whereby the buyer takes the supplier’s definition of an item as a given and asks for a single price for a given specification. In fact the entire architecture of just about all e-sourcing solutions is of this type. In this paper, we argue that this is sub-optimal and that competitive cost models that extract the specification source of variance as pricing factors and subject these factors to competition is a far superior solution, particularly in inflationary environments.

Contributors: The Mitchell Madison Group
Categories: 2022 Fall - Rancho Mirage, Summit Presentations, Whitepaper
SRC Type: Realization, Sourcing