Strategic Sourcing Process
Strategic Sourcing is a structured process which optimizes the government’s supply base while reducing Total Cost of Ownership (TCO) and improving mission delivery. Strategic Sourcing solutions are based on a robust analysis of spending patterns, the clear definition of business needs and requirements, and the alignment of government needs with supply market capabilities and commercial best practices. Strategic Sourcing solutions are developed and implemented collaboratively with stakeholders.
Strategic Sourcing is a rigorous, analytic process.The first step is to identify the set of commodities that may benefit from a Strategic Sourcing implementation. This Opportunity Assessment Analysis can take many forms, but key elements include:
- Assessing the alignment between customer needs and market capabilities.
- Analyzing how well current purchasing practice meets cost and performance criteria for users
- Identifying savings potential, strategic alignment, implementation feasibility, and other criteria used to assess the commodity
Once those commodities are identified, three steps are taken to develop a Strategic Sourcing strategy:
- Commodity Profile Analysis: The Commodity Profile analysis details spending patterns and trends for the commodity, usage patterns and high level business needs. The Commodity Profile is developed through stakeholder interviews and in-depth quantitative analysis using data from multiple sources.
- Market Analysis: The Market Analysis defines supply market trends and commercial best practices for the commodity. Components of this step often include: Analysis of market share, trends, and projections (in both the commercial and government markets) Identification of cost drivers throughout the extended value stream Identification of practices used by commercial firms to lower acquisition costs and to reduce total cost of ownership.
- Commodity Strategy Development: The Commodity Strategy builds and synthesizes the findings of the Commodity Profile and Market Analyses by explicitly defining a strategy and rationale that can be used to lower costs. The Commodity Strategy also includes cost savings estimates and implementation plans.
Strategic Sourcing solutions are managed throughout their life-cycle through ongoing engagement with stakeholders, the collection and analysis of detailed usage/ spend data, and the identification of opportunities for improvement in subsequent solution that are developed in the future.
Benefits of Strategic Sourcing
Strategic Sourcing promotes an effective acquisition system that meets government needs and ensures the prudent use of taxpayer dollars. Specifically, Strategic Sourcing:
DRIVES EFFICIENT GOVERNMENT OPERATIONS.
- Provides visibility into spending habits.
- Lowers Total Cost of Ownership through data analysis.
- Creates commodity expertise.
- Enables better and more informed decisions by employees.
- Minimizes complexity for end-users.
IMPROVES VENDOR PERFORMANCE
- Increases clarity of requirements.
- Optimizes supplier relationships.
- Encourages new and innovative solutions.
- Improves competition & contract structures.
- Improves vendor ability to meet performance goals.
SUPPORTS ADMINISTRATION GOALS
- Helps agencies achieve the President’s savings target of $40B.
- Enables right sizing of the acquisition workforce by minimizing redundant contracts & activities.
- Uses Federal acquisitions to drive sustainable and socio-economic goals.
- Increases transparency & accountability.
When implemented government-wide through the Federal Strategic Sourcing Initiative (FSSI), Strategic Sourcing also encourages cross-agency collaboration and allows the government to aggregate requirements and reduce redundant contracting activities.
The Strategic Sourcing Leadership Council
The Strategic Sourcing Working Group (SSWG) was has now been replaced with the Strategic Sourcing Leadership Council (SSLC) as outlined in the OMB December 2012 Memo.