The relationship between the five dimensions of sourcing value
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The relationship between the five dimensions of sourcing value
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Why “Lowest Cost” Outsourcing Could Be Your Biggest Risk
When it comes to outsourcing, chasing the lowest price often feels like a win—until reality hits. According to Ernie Zibert’s Sourcing Value Compass, the five dimensions of sourcing value—Financial Benefit, Market Discipline, Flexibility, Specialization, and Customer Satisfaction—are deeplyinterconnected.
Here’s the kicker:
• Lowest cost ≠ best deal. It often comes bundled with poor performance and rigidity.
• The relationship between price and satisfaction follows a U-curve: too cheap or too expensive, and satisfaction plummets.
• Push suppliers too hard on price, and you invite the “sourcing nightmare”—scope creep, reduced service quality, and hidden costs.
Pro tip:
Focus on Finance vs. Market Discipline first. Make sure price reflects performance. If your business is transforming fast, invest in Flexibility—it’s your insurance against future constraints.
💡 Want to dive deeper?Check out Ernie Zibert’s insights on sourcing strategy and governance.