The Five Principles Of Sourcing – A Look at Rigour

Trade Extensions, advanced sourcing software experts, has just published the third paper in our Five Principles of Sourcing series.

We have defined five core principles that we think everyone should bear in mind when looking at developing and implementing sourcing strategies.  The first installment of the series was sub-titled “What and Why?” This gave an overview of the subject, explained the motivation behind the series, and outlined the five principles in brief. Then in the second paper, we covered Coherence and Alignment, the first two of our principles. These two previous papers are available here to download from the Trade Extensions website.

The new paper covers principles three and four; Rigour and Openness and you can download the paper (and the two previous ones in the series) now.  Here is an excerpt from the paper covering the first of those principles, explaining one of a number of points we make under that heading.

 

What do we mean by Rigour?

Rigour is about treating the sourcing process with respect, applying diligent and rigorous planning, appropriate processes and analysis to it. Rigour means having a focus on the professionalism of the sourcing process, which for most organisations also reflects on the professionalism of the procurement or sourcing function, team and individuals. We could apply the “rigour” principle to every element of the sourcing process, but let us pick up on some of the more critical areas to which this principle applies.

1 - A rigorous examination of the market and potential suppliers

Effective sourcing requires rigour in terms of assessing the market and potential suppliers that could satisfy the organisation’s procurement needs. This research and analysis should be proportionate to the size, risk and criticality of each contract or requirement of course; no-one is suggesting a deep analysis of a one-off low value supplier. But once we move into more important categories and suppliers, good understanding is vital.

Picking up on one key element of this, the best indicator of whether a supplier is really capable of doing what they claim they can, or what they propose to do in the tender or proposal document, must be their past experience, and how that evidences their skills to perform this contract. Usually that means considering how they have carried out similar work in the past. Yet we often see sourcing exercises where either that question is not asked, or it is asked, but then there is no follow through in terms of actually checking out the truth of what is claimed. Why this sort of basic referencing is not more common is perhaps one of the mysteries of procurement.

Clearly, it may not be feasible to take up references for every potential suppler involved in a major sourcing process, but checking out those who are through to a short-list or final stage is worth the effort. Checking on financial information and other due diligence should also be undertaken, and ongoing reviews are also important for more critical suppliers (to highlight if credit ratings change dramatically, for instance).

First Voice

  1. alun@marketdojo:

    Rigour is certainly a term to be used when looking at any eSourcing activity. And like many approaches may take more time up front although saves more time downstream. Whenever we have clients running eAuction for example, we stress the need to clearly define SLA’s for example With an eAuction this is easier to stipulate due to the live environment bidding and false bids could ruin the event. However this equally applies to any sourcing activity. The real benefit comes during implementation and contract management which goes far more smoothly and that is where the real time is saved. If only everyone looked at it that way!

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