Chapter 14
Sourcing Decisions in a Supply Chain
Supply Chain Management
(3rd Edition)
Outline
The Role of Sourcing in a Supply Chain
Supplier Scoring and Assessment
Supplier Selection and Contracts
Design Collaboration
The Procurement Process
Sourcing Planning and Analysis
Making Sourcing Decisions in Practice
Summary of Learning Objectives
The Role of Sourcing
in a Supply Chain
Sourcing is the entire set of business processes required to
purchase goods and services.
The most significant decision is outsource or perform in-
house.
Outsourcing results in the supply chain function performed
by a third party.
–Will the third party increase the supply chain surplus relative to
performing the activity in house?
–To what extend do risks grow upon outsourcing?
Outsourcing makes sense if it increases the supply chain
surplus without increasing the risks!
Supply chain surplus is the difference between
the value of a product for the customer and the
total cost of all supply chain activities involved in
bringing the product to the customer.
To clarify a distiction between outsourcing and
offshoring
A firm offshores a supply chain function if it
maintains ownership but moves the production
offshore.
A firm outsources if the firm hires an outside firm
to perform operation rather than executing the
operation within the firm.
