The Five Principles of Sourcing – Rigour and Openness

Trade Extensions 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 instalment 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. You can download the paper now.  Here is an excerpt from the paper covering the second of those principles, giving our overview and then explaining one of four critical points we explain under that heading of “openness”. Download the paper to find out what the other three might be.

 

What do we mean by Openness?

This is perhaps the most obvious of the principles. Being open to new suppliers, new ideas and new solutions is fundamental to the concept of generating competitive advantage for the organisation through our procurement and sourcing activities. Openness is key; working on the principle of sticking to what we know is simply a guarantee that a competitor will in time do it better.

That openness means not just seeking out new suppliers, but allowing suppliers (new or existing) to express their preferences, innovative ideas or options, rather than the buyer dictating to them. The use of outcome and output based specifications can be helpful in that regard, and advanced sourcing software can also play a key role in supporting those goals. Here are some of the most important aspects of the openness principle.

  1. Openness to the supply market

The first element of this means quite simply being open to new and different suppliers as part of the sourcing process. That fits inherently with the fundamental role of the procurement function -  to find the best suppliers to meet the organisation’s needs, then contract and work with those suppliers in a manner which drives competitive advantage. That must mean openness to new firms and not being tied down to the same old suppliers.

Too often, procurement (and budget holders) stick to the same short list of potential suppliers in competitive sourcing situations. They may talk about "going out to the market” to source, when in truth the way they define the market is very limited, traditional and restricted.  That openness should also include making an effort to encourage supplier diversity by broadening the types of supplier invited to tender.

Now there are still practical limitations and no-one would suggest asking twenty suppliers to bid for a small and tactical contract. But achieving that balance between an open approach, stimulating competition and practicality of process is vital. Technology can also help. eSourcing and optimisation platforms allow buyers to look at more potential suppliers and more options than could ever be managed with paper or MS Excel-based processes.

 

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