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GuideMost teams run their first sourcing event years later than they should, because the preparation looks like a project. It does not have to be, provided you pick the right category to start with.
A sourcing event is competition, organised. Several suppliers, one specification, and a decision made on comparable information.
The reason companies run them rarely is not scepticism. It is that assembling the baseline, the supplier list and the specification from scratch takes a fortnight nobody has. Choosing the right first category removes most of that work.
Two tests decide whether a category is ready. Is there real competition, meaning at least three suppliers who could genuinely do the work and want it. And is the spend large enough that the effort is repaid.
A good first category is well specified, competitive, and not strategically sensitive. You want to learn the process on something where a mistake is survivable.
Avoid starting with your largest or most critical category, however tempting the savings look. The first event is partly a rehearsal.
| Signal | What it suggests | Good first event |
|---|---|---|
| Three or more capable suppliers | Genuine competition exists | Yes |
| Specification already written down | Little preparation needed | Yes |
| One capable supplier | Concentration risk, not a pricing problem | No, renegotiate instead |
| Strategically critical | Disruption risk outweighs the saving | Not first |
| Off contract leakage | The problem is a catalog gap | Fix the catalog first |
The last row matters. Sourcing a category where the real problem is a thin catalog produces a good price nobody uses.
A baseline is what you currently pay, calculated from actual transactions over a defined period. Not a list price, not last year's quote, and not somebody's recollection.
This is the number every savings claim will eventually be measured against, so it is worth being conservative. A generous baseline produces an impressive number that collapses the first time somebody senior checks it.
Twelve months is usually the right period. Shorter and seasonality distorts it, longer and the market has moved.
The specification is where most of the value is created, because it is what makes responses comparable. Suppliers bidding on different assumptions produce numbers you cannot compare, and the lowest one is usually the one that assumed least.
Be explicit about volume, delivery expectations, service levels and anything that would change the price. If you cannot describe it precisely, that is a signal the category may not be ready.
Writing it down has a second benefit worth mentioning. Teams frequently discover during this step that they have been buying something slightly different from what they thought.
An RFQ suits a specification you have already written where price is the main variable. Suppliers quote, you compare, you award.
An RFP suits work where the approach matters as much as the price, such as managed services. Responses are evaluated against criteria rather than ranked on cost.
A reverse auction suits commodities with at least three suppliers who want the business. Suppliers bid downward in real time, usually seeing their rank rather than each other's prices.
For a first event, an RFQ is almost always the right choice. It is simpler to run and the results are easier to explain internally.
Fairness is not only an ethical question. Suppliers who believe an event was decided in advance stop participating, and you lose the competition you were trying to create.
Invite the incumbent. Excluding them looks tactical, and they usually bid well once they know there is competition.
Give everybody the same information at the same time, and if one supplier asks a clarifying question, share the answer with all of them.
In an auction, show rank rather than prices. It keeps competition genuine while leaving suppliers in control of how far they go.
The award does not have to go to the lowest price, and often should not. Delivery record, quality history and capacity all matter.
What does matter is writing down the reasoning at the time. The question of why a supplier was chosen arrives eventually, usually from somebody who was not involved, and reconstructing it from memory is unconvincing.
Split awards are worth considering where one supplier is cheapest and another more reliable. Volume to the first, the balance to the second, with the reasoning recorded.
Why attaching the agreement to the procurement beats chasing suppliers individually.
Read it AnalysisFour sources that deliver faster than negotiation.
Read it PlaybookClean supplier data is what makes a baseline possible.
Read itBring twelve months of spend in one category. That is enough for a real baseline.
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