Strategic sourcing has fast become best practice in the private sector and makes for good practice in the public sector too.
Strategic sourcing initiatives have been around since the mid-nineties, and more recently the public sector has begun implementing similar initiatives. There are some differences between private sector and public sector and one key area is that public sector procurement activities are regulated largely through legislation and as such there will be local authority Contract Standing Orders or OJEU for open tender processes to follow. In general though where regulations apply in the public sector organisations will have to:
• Advertise an intention to procure normally through a contract notice and hold a competition between tenderers.
• Only exclude a tenderer for justified reasons; the evaluation criteria are normally published in the document pack. Give tenderers the reasons why they were not successful in the tender so that they have the option to appeal the decision.
• Award the contract based on the results of the competition and the rules set out at the outset; sometimes there can be a dwell period (Alcatel) where organisations can challenge the decision and provide information on the contract award decision to tenderers.
The successful implementation of strategic sourcing may lead to an improved understanding of government spending patterns that will assist in optimising the budgeting and planning process and enable commissioning or sourcing practitioners and decision makers to make better informed decisions. Furthermore, deployment of strategic sourcing principles will provide alternative methods to improve services and reduce administrative costs.
Strategic sourcing is not the purchase of goods and services on a day-to-day basis; this is largely transactional or spot buying. Instead, strategic sourcing is the opposite: it is the systematic process that directs the organisation to plan, manage and develop the supply base in line with the organisation’s strategic objectives. It relies on a deep understanding of categories of goods and services, their intended use and associated supply markets based on rigorous analysis to identify the leverage points. This will drive the development of the appropriate sourcing strategy for that organisation.
If this is applied within the public sector, it will reduce the total cost to the taxpayer and/or increase the benefits/value of the service/commodity to the organisation.
An analysis of the supply chain in all areas will ultimately have an impact on how the organisation will direct its spend, through procurement, to achieve its broader socio-economic objectives. Alongside this, it will highlight any areas where deficiencies lie within the current supply markets, which could lead to the need to stimulate new markets that meet the future plans of the organisation.
The deployment of strategic sourcing principles within the public sector can be summarised in four broad categories:
• To generate savings, while meeting the needs for supplies and services;
• To improve procurement processes and practices;
• To transfer knowledge to supply chain practitioners through training and coaching;
• To clearly understand with a high degree of certainty how goods and services are sourced today and the potential for savings in the future.
