The Five Principles of Sourcing – and Why Do Firms Bother?

We wrote last week about our Five Principles of Sourcing idea.  We have defined five core principles, including  Alignment and  Openness, that we think everyone should bear in mind when looking at developing and implementing sourcing strategies.  We will be covering these in depth through this year in a number of short briefing papers, and the first installment is sub-titled “What and Why?” It’s available for download now (free on registration), from the Trade Extensions website.

Our concept is modelled broadly on the principles and credos that firms such as Mars, Ikea and P&G use to define their philosophy and style. The focus is often on the tangible business goals or desired ways of working and the more intangible aspects of the operation, such as the behaviours that staff should display and the beliefs or philosophies that underpin the organisation. Cynics may feel they are nothing more than a blue-chip tick box exercise but, in our personal experience, the best examples actually mean something and affect corporate behaviour in a positive way.

But why is having such principles useful? What do firms hope to achieve from this? In today’s extract from the paper, we look at answering that question.

The Five Principles of Sourcing – What and Why

Why Organisations Define Their “Principles”

We have seen how many leading organisations seek to define and work within the guidance offered by particular values or principles. Whilst many very successful organisations choose not to use such a tool, there are three key reasons for developing a set of principles, and each can benefit the organisation in different ways.

- Corporate memory, culture and style – principles help to define what an organisation is about, what the owners or founders want it to be, how it should behave and the style with which it operates. They are more concise, memorable and emotionally rich than any lengthy manual, guidance document or corporate plan.

- A manual of good practice and an educational tool - this is linked to the above point, but relates more directly to how the organisation should successfully operate. The principles should be particularly useful when things get tough and difficult issues or problems have to be faced.

- Appealing to people outside the organisation – the cynics might see principle as simply a marketing tool, or something that sounds impressive to appeal to the industry regulators or policy makers. But whether it is customers, suppliers, or potential employees, a set of principles can tell those on the outside something about the organisation that may make them feel more positively inclined towards it.

The first point explains why privately owned firms, or those with strong founding individuals or families, perhaps more often follow such principles compared to more corporate businesses. But whatever the origins, the principles often survive for long periods of time and genuinely impact on the behaviours and style of the organisation.

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