ABSTRACT
Our research shows virtually every Level 1 and 2 company involved in supply chain management has conducted a sourcing exercise and can document savings that have flowed to the profits of the firm. The amounts vary but are typically in the range of 5 to 8% of the total buy. As prices are lowered and suppliers shave margins on their goods and services, the effort does not end, however, as there is a relentless drive from senior management to continue to reduce costs through sourcing. With purchases representing anywhere from 25 to 75% of a firm’s cost of sales, it is a natural tendency to want to keep attention focused on the supply base and those responsible for awarding the business. The result of sourcing becomes a central focus throughout the supply chain evolutionary process.
