Scenario analysis is a strategic decision-making technique that evaluates how different sets of assumptions impact potential outcomes. In the context of sourcing, it involves modeling alternative award decisions based on variables like cost, risk exposure, supplier diversity, sustainability, capacity constraints, and delivery timelines.
Rather than relying on a single “best bid wins” approach, scenario analysis allows sourcing teams to explore a range of possibilities such as:
- Lowest cost scenario
- Risk-minimized scenario
- Incumbent-preferred scenario
- Sustainability-optimized scenario
- Hybrid cost/risk trade-off scenario
These comparative insights enable better alignment between procurement goals and broader corporate priorities.