You have two suppliers. One of them is a price check.

Splitting purchases 95/5 looks like insurance and looks like a benchmark. Under pressure it usually turns out to be neither.

By Steve 5 min read
Abstract bridge artwork for You have two suppliers. One of them is a price check.

A common procurement arrangement: one supplier does almost all the volume, and a second holds a token share: a few per cent, one product line, the odd order. The stated reasons are sensible. It keeps the incumbent honest on price. It means someone else knows how to make the thing. It avoids the naked exposure of single sourcing. The arrangement is worth examining, because the two jobs it is supposed to do, supply security and price discovery, both depend on conditions that a 5% share rarely satisfies. And the moment…

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