Business Core · Supply Chain · Module
Sourcing
Deciding where inputs come from and on what terms, including how much concentration the organisation is willing to carry.
The idea
How it works
Unit price is the most visible and least complete measure of what an input costs. Quality variation, lead time, minimum orders, payment terms and the cost of switching all belong in the comparison, and they routinely reverse it.
Concentration is a deliberate trade. A single supplier gives better prices, deeper collaboration and a single point of failure. Multiple suppliers cost more and fail less catastrophically. Neither is correct in general; only choosing by accident is wrong.
Working with it
In practice
- 01
Compare on total cost
Price, quality cost, lead time, terms and switching cost. The ranking usually changes.
- 02
Decide concentration deliberately
Single-source for depth where failure is survivable; dual-source where it is not.
- 03
Know the tier behind your supplier
Their single point of failure becomes yours without appearing anywhere in your records.
- 04
Keep switching possible
Bespoke specifications and deep integration raise the switching cost until the relationship is no longer negotiable.
One level in
The components of sourcing
A component is something that exists afterwards which did not exist before — a deliverable or a mechanism, not an intention.
The concentration position
Where the organisation depends on one source, and whether that is a choice.
Learn
Your supplier’s single point of failure becomes yours, and it appears nowhere in your own records.
The other modules in supply chain
Logistics
Moving things from where they are to where they are needed, on time and intact, at a cost that makes sense.
LearnInventory
What is held, where, and why — balancing the cost of holding stock against the cost of not having it.
LearnResilience
The capacity to keep supplying when something goes wrong — which it will, and rarely in the way that was planned for.
Learn