Procurement, Sourcing and Supplier Risk

Most companies that make or sell physical goods spend more than half of their revenue buying things from other companies, so procurement decides much of their cost to serve and much of their risk. A manufacturer's purchased materials and services are commonly 50–70% of its cost of goods; a retailer's purchases from suppliers are most of its cost of sales. For decades procurement was run as a price-negotiation function, measured on "savings" against last year's price. The 2020–22 shortages, the 2025–26 tariff sequence and a wave of forced-labour and due-diligence laws turned it into a risk function as well: buyers discovered that the cheapest supplier could be a single plant, in one country, using an input from a region whose goods the US presumes to be made with forced labour. The Uyghur Forced Labor Prevention Act's rebuttable presumption has applied since 21 Jun 2022; by Aug 2025 the UFLPA Entity List named ~144 entities, and CBP detained ~6,636 shipments under the law in the first half of 2025, more than the ~4,619 it detained in all of 2024 (DHS strategy update and CBP data via law-firm summaries, reported; check the CBP dashboard). In Europe the Corporate Sustainability Due Diligence Directive was cut back by the Omnibus I directive (Directive (EU) 2026/470, in force 18 Mar 2026): it now covers only companies with more than 5,000 employees and €1.5bn of turnover, from 26 Jul 2029 (law-firm alerts, reported). This section explains strategic sourcing and the category matrix, total cost of ownership and should-cost, supplier concentration and multi-sourcing (with failures from Toyota's 1997 Aisin fire to Abbott's 2022 infant-formula plant closure), buyer power and its limits (Walmart–P&G, Tesco's 2014 supplier-income scandal), procurement and supplier-risk software (SAP Ariba, Coupa), sourcing agents (Li & Fung), forced-labour and due-diligence rules in the US and Europe, contract clauses for tariffs and refunds, and how an experienced chief procurement officer thinks.