During a sourcing event, the business unit must be allowed to provide input on decision criteria and weightings for supplier selection to ensure that the supplier selection process reflects the priorities of both the Procurement organization and business unit. Finally, the business unit should be actively engaged in evaluating supplier proposals and in selecting a supplier.
2. Bring More Than a Process – Understand What You're Buying: Procurement needs to possess category expertise to successfully apply its standard sourcing process to specific categories. Therefore, the department must understand the cost drivers for a category in order to develop the appropriate bidding structure, be aware of the key contractual terms and conditions to negotiate, and anticipate behaviors of the suppliers competing for business. An understanding of the goods and services being procured, as well as how they are used within the business unit, allows Procurement to customize the sourcing process with tactics such as reverse auctions and multiple rounds of negotiation.
How to implement: Procurement should gather information from the business unit, including how the goods and services are currently used, how they will be used in the future, and historical and projected volumes. The business unit should explain which aspects of the goods and services are most important. This, in turn, should drive development of detailed requirements for the goods and services being procured – such requirements are critical to ensuring consistent proposals across suppliers of the exact goods and services needed.
Team member understanding of suppliers and the marketplace can be derived through prior experience sourcing the category, prior experience interacting with the suppliers or by hiring new resources into Procurement for long-term placement in category sourcing. Expertise can be maintained by continuously researching the category, attending supplier conferences and by meeting with key suppliers. As a long-term strategy, Procurement functions may choose to align sourcing resources by category, instead of by business unit, to develop this expertise over time.
3. Educate Your Internal Customer: Procurement should explain the purpose of the sourcing process and illustrate how the process can drive a logical and auditable selection of a supplier that can provide quality goods and services. A formal sourcing process ensures that marketplace alternatives are considered in a supplier selection and that evaluation of prospective suppliers takes place with minimal bias, according to predefined selection criteria that drive to the optimal solution for the business.
How to implement: Documentation of the sourcing process and its benefits should be presented by Procurement in kickoff meeting materials. Stated benefits can include obtaining an understanding of the latest goods and services available in the marketplace, as well as expected savings compared to current costs. Ideally, case studies should be provided to highlight Procurement's previous successes. The list of benefits must showcase Procurement's desire to drive both savings and quality. Savings should be a goal achieved through competitive pressures of the marketplace, applied against a clearly defined set of goods and services.
Procurement should help the business units learn about the sourcing process – the steps that will take place, key inputs required from the business unit, where in the process key decisions will be made and how strategy changes can be made based on information gleaned from the marketplace or from internal sources. The team should describe how a quantitative selection process that removes biases during supplier selection helps maintain the team's focus on project objectives, by preventing undue influence by supplier personalities or noncritical aspects of supplier bids.
4. Be Flexible: A sourcing project strategy and approach can be flexible while still adhering to a structured, objective selection process. Procurement should pay attention to business unit time constraints and show flexibility with respect to the sourcing approach based on the time available for the project.