Chapter 6: Sourcing categories

Leverage

low risk, high value commodity items where many alternatives of supply exist and supply risk is low. Spend is high and there are potential procurement savings. Consolidate volume as a negotiation tool Use competitive marketplace to reduce costs Automate supplier interfaces to minimize process related costs

Non-Critical

routine items that involve a low percentage of the firms' total spend and involve very little supply risk. low risk, low value to company Simplify and streamline the purchasing process Reduce number of suppliers and simplify ordering Transfer buying responsibility to "users' within the company

Bottleneck

Low value, high risk unique procurement problems. Supply risk is high and availability is low. Small number of alternative suppliers. Maintain safety/strategic stock Develop contingency plans Strengthen relationships Search for alternatives

Sourcing Categories

Non-critical, bottleneck, leverage, strategic

Strategic Items

high risk, high value strategic items and services that involve a high level of expenditure and are vital to the firm's success. Ensure availability of supply Focus on relationship building Encourage process integration and innovation Frequent communications Establish mutually agreeable supplier performance criteria