Supply Chain · Sourcing · Component
The total cost comparison
What each option actually costs once quality, lead time, terms and switching are included — which reverses the ranking often enough to be worth doing every time.
The deliverable
What it is
Unit price is the most visible and least complete measure. Quality variation, lead time, minimum orders and payment terms all convert into cost, and they do so unevenly across suppliers.
The comparison does not need to be precise. It needs to be complete enough that the ranking is trustworthy.
One level in
What it is made of
Each element is a constituent part of the component. Follow one to see the attributes it carries.
The price
The unit price and what it includes.
3 attributes: Unit price · Includes · Minimum order
LearnThe quality cost
What defect rate and variability cost downstream.
3 attributes: Defect rate · Cost per defect · Variability
LearnThe lead time cost
What lead time and its variability cost in inventory and flexibility.
3 attributes: Lead time · Variability · Inventory cost
Learn
A cheaper input with higher variability costs more, because the buffer has to cover the worst case rather than the average.
The other components in sourcing
The supplier list
Who supplies what, on what terms, and at what share of each input — the base record everything else in the object depends on.
LearnThe concentration position
Where the organisation depends on one source, and whether that is a decision or an accumulation.
Learn