Will you make it yourself, or outsource to someone else? How do you decide which activities to outsource, and which tasks to keep in-house?
One seminar posed a question crucial to the future of procurement reform: Is strategic sourcing a fad or is it here to stay? To delve further into that question, I called some of my former colleagues in state procurement offices across the country.
History reveals that after a decade of adoption in the private sector, strategic sourcing made its first appearance in state government in in Delaware. Strategic sourcing was the brain child of Treasurer Jack Markell, a good-government reformer who had seen its value when he was a senior executive at Nextel and Comcast.
As success spread, more and more states jumped on the bandwagon. Bymore than two dozen states had hired consulting firms to help lead sourcing engagements. In speaking with a dozen state procurement officials over the last two weeks, I discovered a number of emerging themes, including: While many state procurement directors complained that there was a significant culture clash between the consultants and the government procurement staffs, most states appreciated the energy and extra arms and legs that a team of consultants could bring to a sourcing project.
Governors and budget chiefs looked under every rock, desperately searching for ways to save money. Chief executives saw strategic sourcing as a painless way to realize tens of millions of dollars in savings without having to layoff state employees or cut programs that mattered to citizens.
Today, with all but a handful of states in the black, the need to find operational efficiencies is less urgent. By the time the first or second cycle of sourcing projects had been completed, the next round of commodities tended to be far more complex and time consuming to source.
While this number may be sufficient to establish dozens of multiple award contracts, it falls way below the massive level of effort required to establish a strategically sourced contract. In most states, a buyer requires 8 to 14 months of full-time work to set up a strategically sourced contract.
States Continue Sourcing With these obstacles, what continues to drive strategic sourcing efforts?
A number of states continue to apply the strategic sourcing methodology, but with a more limited universe of commodities. Against this backdrop, it is easy to see why states will continue to hunger for the savings that strategic sourcing can deliver.
Because the State had driven all of its volume to Dell and was now a very big customer, Dell knew that it has to deliver. The computer giant proactively contacted each agency with affected laptops and had those batteries replaced in a matter of days. State procurement officials report to governors that face reelection every two or four years.
For states to continue seeing sourcing successes, the unwavering support of the chief executive must continue. They must continue to support the radical change from the status quo.
Vendors who may have sold to a particular agency for decades at high margins may find themselves without a state contract. Agencies who have enjoyed years of local decision making now see the central procurement unit establishing contracts that offer fewer choices of suppliers and products in order to maximize buying power.
Legislators hear complaints from companies that are major employers and campaign contributors who lose state contracts.
To sustain sourcing savings, the governor must—must! The good news is that most procurement directors have told me that their governors continue to support sourcing. I attribute this to the genuine inclination from a new breed of pragmatic governors to run an efficient government and drive the best value for their taxpayers.
While procurement was once a fairly unrecognized, back-office function in most governments, with the advent of strategic sourcing, it has become a political asset to many administrations. Chief procurement officers have given their governors the gift of excellent media coverage, allowing the boss to claim the mantle of fiscal responsibility.
As long as the savings and headlines from strategic sourcing continue, procurement professionals like Topper, Rothman, Wynkoop, and Antolin will have the executive support they need to sustain strategic sourcing for years to come. If your entity has taken an innovative approach to strategic sourcing, e-mail Yarkin at dyarkin govsourcing.In a previous post I discussed what Strategic Sourcing was all about, in today's post I would like to introduce what I call the seven steps to strategic sourcing.
It is about leadership and superior management capabilities." Creating an effective strategic sourcing approach is not easy and requires a great deal of analysis and consideration.
A great new opportunity has arisen for a Strategic Sourcing Officer based in Dubai for a leading blue chip multinational. Candidates will work with a structured approach to reduce total cost while building superior capabilities within the organization and be responsible for.
Combining this experience with a clear understanding of the organization’s strategic needs, capabilities, and industry context can help craft the right strategy for a .
Building winning relationships in business process outsourcing services implement “global sourcing” of organizational capabilities for the service provider and validates (Gottfredson et al., ) or strategic sourcing (Holcomb and Hitt, ; Quinn and Hilmer, ).
Capability sourcing is an organizing process to execute strategic sourcing and improve the firm's competitive position through gaining access to best-in-class capabilities across the value chain.