Supply chain
Strategic sourcing: a supplier selection example
Three suppliers quote for the same carton. The cheapest fails a required test. Follow the decision from a clear requirement to an award the operation can use.
Strategic sourcing is the process of deciding how to obtain what the business needs, using market evidence, supplier capability and total cost. It starts before a request for prices and continues after the contract is awarded. CIPS describes that longer view, including implementation and performance review.
A packaging buyer receives three quotes. One is 8% below the next cheapest. The saving looks attractive until the trial cartons collapse under the load they must carry.
The quote was competitive. The offer did not meet the requirement.
Start the sourcing process with the job the item must do
In this fictional example, a factory needs 100,000 cartons over a year. Before approaching suppliers, purchasing, quality and operations agree the drawing, stacking test, delivery schedule and evidence needed for approval.
Some conditions are mandatory: the carton must pass the agreed stacking test, fit the packing equipment and arrive in the required quantities. Others allow a trade-off, such as price, shorter lead time or the amount of stock the factory must hold.
That distinction needs to exist before anyone sees the offers. Otherwise, the team can keep changing the criteria to justify the supplier it already prefers.
The Kraljic matrix helps decide how much sourcing attention a category needs. It does not qualify an individual supplier or replace this requirement review.
RFI, RFP and RFQ: ask for the information you need
These common labels describe different requests. Organisations use them differently, so spell out the expected response.
| Request | Main purpose | Carton example |
|---|---|---|
| Request for information (RFI) | Understand the market and available capabilities | Which suppliers can make this material and demonstrate the required testing? |
| Request for proposal (RFP) | Compare proposed ways to meet a need | How would each supplier provide stock, deliveries and contingency supply? |
| Request for quotation (RFQ) | Obtain prices against a sufficiently defined requirement | Quote the same drawing, quantities, delivery terms and approval conditions |
You do not need three formal exercises for every purchase. Here, the design is already settled, so a short capability check followed by an RFQ may be enough. A new packaging solution with unresolved design choices would need more discussion before prices became comparable.
Qualify suppliers before ranking their offers
CIPS's supplier-selection guidance includes capability, capacity and financial checks, with purchasing and the relevant business teams involved. In this factory, a supplier must also provide samples and evidence against the mandatory conditions.
| Supplier | Price per carton | Stacking test | Equipment trial | Delivery capacity | Eligible? |
|---|---|---|---|---|---|
| A | €0.46 | Failed | Passed | Yes | No |
| B | €0.50 | Passed | Passed | Yes | Yes |
| C | €0.51 | Passed | Passed | Yes | Yes |
Fictional suppliers and results. All quotes use the same annual quantity and delivery basis. A can be reconsidered after a corrected sample and successful qualification; its current price does not cancel the failed test.
Compare the qualified offers on a common basis
The team estimates carton purchases, normal freight and the cost of holding the required stock for the same year. B totals €54,000; C totals €55,000. These are declared planning assumptions, not supplier performance results. The procurement total-cost example shows why extra freight belongs in the comparison.
Cost is one part of the decision. The team agreed three criteria and their weights before scoring: whole cost 50%, delivery evidence 30% and technical support 20%. Each uses a defined 1-to-5 scale, where 5 is strongest.
| Eligible supplier | Whole cost | Delivery evidence | Technical support | Weighted score out of 5 |
|---|---|---|---|---|
| B | 5 | 3 | 3 | 4.0 |
| C | 4 | 5 | 4 | 4.3 |
C scores 4 × 0.50 + 5 × 0.30 + 4 × 0.20 = 4.3. The factory would pay €1,000 more for the stronger delivery and support evidence under its chosen criteria.
The score organises judgement. It does not establish that C will save exactly €1,000 in disruption. Review the evidence behind each rating and test whether reasonable changes in the weights would reverse the result. If they do, explain why the final choice still fits the business need.
Turn the award into a workable supply arrangement
Record the selected specification, approval evidence, commercial basis, delivery commitments and unresolved conditions. Agree who can release the first order and what happens if the first deliveries fail the acceptance checks.
Then use a supplier scorecard to compare actual performance with those commitments. Selection evidence and delivery evidence answer different questions. The first supports an award; the second shows whether the arrangement is working.
For this carton, C can be selected only after the decision owner accepts the trade-off and the agreed conditions are complete. A low quote, a passed trial and a high score each tell part of the story. The award record needs to connect them.
Sources
- CIPS: Strategic sourcing. Long-term sourcing scope and review.
- CIPS: Supplier selection. Capability checks and cross-functional selection.
All supplier names, amounts, scores and test results are fictional. The weights and scoring scale belong to this example; they are not a universal procurement standard.