There are many different factors that can influence (1) the ease in which a category may be sourced (2) the likelihood of favorable results and (3) the timing and organizational impact from those results.
The Category Sourcing Scorecard that we are developing in this series organizes these different factors into subsets and provides a framework so those factors may be quantified. The end result is a (virtual) tool or scorecard that calculates a comparable score for each category that can then be used to order or prioritize a sourcing pipeline. The Scorecard includes the five subsets below (click each link to see individual articles):
- Internal or Organizational factors
- Market factors
- Supplier factors
- Buyer factors – (Part 1) TODAY! (Part 2) – Tomorrow
- Category factors – Next
Buying Factors
While the supplier factors describe the capabilities and attributes of the suppliers of a specific category, the buying factors in this group focus on the buying process and how the usage of the category impacts both the organization and results. We have placed these factors into this group because how a category is used is not universal across different companies and is often quite dependent on the unique buying company. That said, I am not necessarily thrilled by the title of this group of factors and will be considering replacement titles – please email me if you have any ideas.
Factor 1 – Supply Assurance Risk
Discussion: How likely or what level of risk is there in keeping a steady supply of this category available to the organization? Some aspects of this risk may be associated with the supplier (for example, the suppliers in this category may all be facing an uncertain financial future) and some aspects of this risk may be associated with the category itself (where it is found, how it is produced, and how it is delivered), but supply assurance is also dependent on the sourcing (or buying) strategy that is used by the buying entity; for example, using single source versus dual source strategy or deciding to source from a low-cost region instead of locally. Since we are evaluating this factor before the final sourcing strategy is determined, the team will have to base its answer on the previously used sourcing strategy or guesstimate what it will be this time around. Additionally, the buying enterprise may have some difficulty in managing, storing, or accessing the supply. As a result, we’ve placed this risk under the buying factors.
Scorecard Question: What best describes the supply continuity risk?
Multiple Choice Answers: (A) High (B) Average (C) Low
Factor 2 – Production Impact
Discussion: There are many different ways that a category can impact the business (or production). This factor looks at the magnitude of that impact. For example, a category may be the critical material or component in the company’s primary product line like silicon for chip makers or stainless steel or silver in the production of silverware. It is also possible that the category may be a relatively small or unimportant component in the final product but, the way in which it is used in the manufacturing process or by the company makes it very or relatively important – these could be chemical catalysts, critical fasteners or sub-assemblies, or a minor ingredient that creates the special or patented flavor. The impact can also be felt on the services side, say the choice of an auditor, marketing agency, or the consultant chosen to lead a top-down, organizational transformation.
Question: Describe the potential impact that this category has on the overall business including production and/or delivery?
Multiple Choice Answers: (A) High (B) Average (C) Low
Postscript: We will need to provide some guidance and context to the answers to the two above questions to help sourcing teams quantify the relative magnitude of these factors in a way that is comparable to the other categories that are being evaluated.
