When applied in the commercial world, strategic sourcing refers to a group of processes and analyses that lead to different manifestations like technical quality. The need to heighten quality and capability levels needed to deliver optimum excellence for customers led to the demand to apply strategic sourcing.
In the commercial world, strategic sourcing is applied for complex services and when combined with value acquisition approaches to achieve maximum quality, especially for true commodities.
Here is where the problem lies. Some contextualize the term “strategic sourcing” as a method for aggregating buys as a means of driving down prices. Government agencies experience this scenario. A smart idea, yes but if not wisely applied, failures are expected.
What Government Strategic Sourcing Should Be Like?
Not until a proper definition of the concept is arrived at, government should be cautious in applying strategic sourcing. It is not to say that this process is bad or unhelpful to achieve cost-efficiency, but the government has the tendency to too quickly adopt en masse new concepts without some careful assessment where and how strategic sourcing concepts are best applied.
Implication to Small Businesses of Federal Strategic Sourcing Initiative
There are contradicting sides but some in Congress and in the contracting sector are worried small businesses will not yield much benefit out of strategic sourcing. The main argument against concern competition. It says that businesses, particularly the smaller ones, will be unable to compete to provide government with goods and services.
Erosion of competition is a likely eventuality when the bigger and handful few gets the lion’s share of the government-wide contracts. It is not surprising given big companies’ resources, capabilities and reputation. In the long term, competition will be curtailed and the goods and services derived out of strategic sourcing become only limited to the bigger parties.
How is Strategic Sourcing Best Understood?
As an analytic approach to spending, the view should be how strategic sourcing can benefit the government in the long-term as opposed to the focus of procurement officers to vie on reducing unit costs in the short term.
Small businesses in the IT sector offering strategic sourcing edge out the big ones as the go-to vendors by government because they offer goods and services in response to unique and specialised component. But they could offer so much more if they will not offer “simply” products. If they will consider the demand to provide a more useful and indispensable products and services, the small businesses should approach strategic sourcing in a new way.
Small businesses should match government demand to use strategic sourcing to generate savings but should belabour to offer unique and custom products and services that will secure government requirements.
- A show of support for strategic sourcing – FCW (govconchannel.com)
- Direct Procurement: Improving Procurement’s Quality of Influence in the Supply Chain (spendmatters.com)
- Strategic tips for small business owners (servcorp.com.ph)