The aim of this chapter is to introduce you to a number of important concepts involving sourcing and procurement decisions. All organizations face decisions of supplier selection, sourcing, risk evaluation, legal and ethical considerations. Organizations need to source supplies from a variety of different organizations locally, nationally and/or globally. Each type of sourcing has its own merits and they are discussed in the first part of this chapter. The iceberg theory of cost comparisons in sourcing and procurement decisions is then explained and examples are given relating to hidden costs in the decision-making processes. In explaining these hidden costs a number of influencing factors are discussed including the ways in which organizational performance and buyer performance is evaluated and the consequences of
the measures on the decision-making processes. The next part of the chapter discusses supplier selection criteria and examines the role of manufacturers, wholesalers and distributors as intermediaries. Also examined are single and multiple sourcing strategies and their relative merits before assessing environmental and ethical issues related to sourcing and procurement. The final part of the chapter focuses on supplier development programmes and their role in supply chain sourcing strategies and the modern trend towards supply base rationalization.