In a Sourcing Business Model, stakeholders must answer key questions to determine the right model.

In deciding the correct Sourcing Business Model, stakeholders must clarify two fundamental issues:

The most appropriate contractual relationship [C]: This could be transactional [short-term, cost-focused], relational [long-term collaboration], or investment-based [joint ventures, alliances]. The choice defines how risks and rewards are shared with suppliers.

The most appropriate economic model [D]: This determines the pricing and performance framework, e.g., transactional [pay-per-unit], output-based, or outcome-based [pay-for-results].

Options A and B are important but secondary considerations. Risk appetite and TCO factors are inputs to decision-making, but the contractual and economic models define the overall sourcing structure.

This reflects the study guide’s emphasis that sourcing models should be tailored to category complexity and business objectives. Using the wrong model can undermine supplier relationships and value delivery.

[Ref: CIPS L5M6 Study Guide, p.32 – Key questions in Sourcing Business Models]