What Do The Indy 500 & Sourcing Projects Have in Common?

On Sunday, Indianapolis will rev up for The Indianapolis 500, which is the world’s most famous and prestigious auto race. “The Greatest Spectacle in Racing” covers 500 miles (200 laps) on the 2.5 mile oval track.

So what can purchasing pros learn from the Indy 500?

The Indianapolis 500 isn’t won in one lap – and an auction isn’t won based on price only.

Price is certainly an important factor when choosing the right supplier for your business needs, but purchasing pros should consider other factors before awarding a vendor with business (and bringing home the checkered flag). Here are a few other options you should discuss before selecting a supplier:

  • The cost of bringing on a new supplier
  • Internal Supplier Diversity / CSR requirements
  • Current supplier performance ratings
  • Supplier Risk (i.e. Are you putting all of your eggs in one basket?)

Optimization also helps you take your analysis beyond price. Optimization allows you to create scenarios that include non-price factor and “what if” scenarios, which can be created and executed quickly. Examples of commonly executed scenarios include:

  • Percentage of business to one supplier
  • No more than X number of suppliers awarded business for a specific package
  • Percentage of business to an incumbent supplier
  • Percentage of business for a diverse supplier
  • Business awarded to a top performing supplier

So remember, five hundred miles is not a sprint. Racing teams must think strategically when planning pit stops for gas, tire changes, and car alterations. In order to finish (and hopefully win) a race, the most successful teams don’t make these decisions based on speed only. They adapt their strategy based on accidents, cautions, and track conditions. Similarly, sourcing managers must also make strategic decisions when awarding business to a supplier.

So, how do you plan your big sourcing projects? Does price always win or do you take into consideration other factors when awarding the business and bringing home the checkered flag? Share your comments, blog, or tweet us @iasta.com.

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