Understanding the True Cost of Sourcing [Archive.org URL]

Global strategic sourcing evolved as a more sophisticated approach to selecting and managing the supply base and the procurement of direct materials. In strategic sourcing, the relationships are longer-term and there is a drive for continual improvement along many dimensions. Most companies that have adopted strategic sourcing practices have developed in-depth supplier scorecards for tracking performance and driving improvements. However, tools and methodologies for measuring the true total cost of supply have lagged behind. An ideal approach goes beyond supplier performance ratings to accurately calculating the effect of the supplier’s performance on all aspects of the total cost.

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