Best Practice in Strategic Sourcing Methodology – AlLMOST RUNNING

Description:

Strategic sourcing is a supply management tool that delivers significant cost reductions and other benefits. More specifically, it’s a periodic event that includes the identification and selection of initial commercial arrangements with a selected supplier that either creates or resets a relationship.

Strategic Sourcing methodology is used to identify, examine, select and implement sourcing alternatives for a specific Sourcing Group (SG). It encompass the whole process for evaluating, selecting and aligning with supplier(s) to achieve operational improvements and support overall strategic objectives.

Strategic Sourcing focuses on total costs and not just the purchase price; Strategic Sourcing assists an organization by gaining a good understanding of its requirements, knowing how it must map to the existing supply market, and then develop a plan for both short and long-term objectives. There are many ways to segment a strategic sourcing program into a step by step approach.

Strategic Sourcing begins with data collection and analysis to develop a deeper understanding of where and how the state spends money. During this assessment, the state develops profiles of different catagories of spend and a business case for the savings to be realized by pursuing strategic sourcing.

The assessment typically takes two to three months – but the invaluable help it provides in providing a baseline of spending and determining priorities for improvement makes it a worthwhile exercise, even if the state or province does not continue with further phases of strategic sourcing implementation: Often, what’s found leads the government to wmbark upon legislative procurement reform.

After assessment, strategic sourcing moves to implementation: harmonizing or normalizing reqirements and service levels that take into account the bigger picture ( including elements such as total cost of ownership and value through customer service); evaluating supplier markets; developing strategies and tactics for sourcing of different categories; evaluating suppliers through competitive bids; and then moving into negotiations for awarding new contratcs.

Objectives:

• Analysis of current spend to develop insight into life cycle cost drivers and requirements
• Identification of best practices (both across the government and in the commercial sector) which have been successful in minimizing cost and improving value
• Analysis of the supply market to identify the trends and economic factors that can be leveraged to optimize the government’s acquisition
• Development of a strategy to lower the government’s total cost of ownership
• Development of a business case to ensure the strategy Execution of the acquisition
• Ongoing performance management, including the collection of detailed data from vendors to ensure value is achieved