Step 3 includes such practices as: conducting the bid (collecting pricing and proposals), performing negotiations and prioritizing and planning for risk

A MSA sets the tone of the relationship as it may be used for multiple engagements between parties, establishes risk allocation between parties, and addresses relationship aspects that will be applicable across multiple engagements and geographies, etc.

It contains overarching, constitutional or guiding language with ore specific, complete language located in the Schedules

One of the elements comprising a company’s total supply-chain management costs. These costs consist of the following – • Materials (Commodity) Management and Planning – All costs associated with supplier sourcing, contract negotiation and qualification, and the preparation, placement, and tracking of a purchase order, including all costs related to buyer/planners. • Supplier Quality Engineering – The costs associated with the determination, development/certification, and monitoring of suppliers’ capabilities to fully satisfy the applicable quality and regulatory requirements. • Inbound Freight and Duties – Freight costs associated with the movement of material from a vendor to the buyer and the associated administrative tasks. Duties are those fees and taxes levied by government for moving purchased material across international borders. Customs broker fees should also be considered in this category. • Receiving and Put Away – All costs associated with taking possession of material and storing it. Note that carrying costs are not a part of acquisition, and inspection is handled separately. • Incoming Inspection – All costs associated with the inspection and testing of received materials to verify compliance with specifications. • Material Process and Component Engineering – Those tasks required to document and communicate component specifications, as well as reviews to improve the manufacturability of the purchased item. • Tooling – Those costs associated with the design, development, and depreciation of the tooling required to produce a purchased item. A tooling cost would be incurred by a company if they actually paid for equipment and/or maintenance for a contract manufacturer that makes their product. Sometimes, there isn’t enough incentive for a contract manufacturer to upgrade plant equipment to a level of quality that a company requires, so the company will pay for the upgrades and maintenance to ensure high quality. May not be common in some industries such as the Chemicals.

A managerial and organizational approach used to integrate the supply management functions in an organization. It involves planning, acquisition, flow, and distribution of production materials from the raw material state to the finished product state. Activities included typically are procurement, inventory management, receiving, stores and warehousing, in-plant materials handling, production planning and control, traffic, and surplus and salvage.

The prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk.

The division of activities or services involved in the execution of an essential business function among a combination of providers, both internal and external.

The Sourcing Industry Group (SIG) defines the multi-step process as: 1) Assess-study the environment; 2) Analyze-select the approach; 3) Execute-chart the course; and 4) Evaluate-benchmark and refine. Step 1 includes performing internal and external analysis, and building a total cost model. Critical components include gathering requirements, aligning with business objectives, assessing the market, gathering best practices and benchmarks, and performing cost analysis. Step 2 includes such practices as: building the bid-sourcing strategy, rationalizing the supply market and suppliers, and understanding total costs. Critical components include the segmenting of suppliers, spend and market; assessing and balancing value; and assessing risk. Critical components include selection drivers, bid documents, and resulting contracts. Step 4 includes such practices as: improving on value creation and processes, managing supplier risk and governing the contract performance. Critical components include plans for continuous improvement, supplier innovation, risk tracking reporting, and relationship and governance. An illustration of this process can be found in the SIG Resource Center at: or by searching for “SIG Sourcing Wheel”.