Importance of the Sourcing Strategy through the Prism of FAR

In our earlier posts, we praised strategic sourcing. The concept is familiar, with its routes in the Buygrid framework (1967), but many companies are still working on embracing it. 

A sourcing strategy is at the core of strategic sourcing. I recall some of my former colleagues disliking it and perceiving it as an element of a bureaucratic process.

This post will look at a sourcing strategy from an uncommon perspective, trying to prove its vital importance for the procurement profession. 

The sourcing strategy definition and overview 

A sourcing strategy is a structured and comprehensive plan that outlines how an organization will acquire the goods, services, or resources it needs to operate effectively and achieve its business objectives. 

It involves making deliberate decisions about where to source these items, how to engage with suppliers, and how to manage the procurement process to achieve optimal results.

Sourcing strategy benefits

You can find dozens of arguments supporting the importance of a sourcing strategy.

We suggest just three, which are rare.

Sourcing project retrospective

A sourcing strategy is a product of proactive planning. It's a script of your sourcing project, which you prepare before entering the market and engaging with suppliers. 

Upon completing a sourcing project, you can exercise an essential element of Agile methodology - a retrospective. It is when your team reflects on past work and identifies ways to improve.

You may analyze your analytical assumptions and patterns, negotiation planning, and supply market study from the post-mortem perspective and rectify false practices for the future.

Furthermore, you may assess and report on the actual value delivery vs. initial forecasts. 

Similarly, your management may evaluate the proficiency of underlying analysis and assumptions by comparing it with outcomes.

Audit trail  

An audit trail is a step-by-step record that tracks purchase orders, contracts, and payments back to their source.

A sourcing strategy is a vital element of this audit trail. Anyone can follow your assumptions, ideas, and estimates from the project's origins. You won't need to explain your decisions and specific process steps if their logic is duly described and approved in a sourcing strategy.

You or your successors can review past projects and understand how they've been planned and accomplished.  

Personal initiative and sound business judgment

U.S. Federal Acquisition Regulation (FAR) is one of the most comprehensive descriptions of its actors' public procurement working practices, roles, and responsibilities. 

It's the detailed and stringent code of procurement governance. Still, FAR declared personal initiative and sound business judgment among the guiding principles of procurement. 

"The role of each member of the Acquisition Team is to exercise personal initiative and sound business judgment in providing the best value product or service to meet the customer’s needs. In exercising initiative, Government members of the Acquisition Team may assume if a specific strategy, practice, policy, or procedure is in the best interests of the Government and is not addressed in the FAR nor prohibited by law (statute or case law), Executive order or other regulation, that the strategy, practice, policy or procedure is a permissible exercise of authority."

A sourcing strategy enables procurement initiative and innovation.   

Indeed, anyone in procurement wants to exercise innovative approaches and diverse business practices. Unfortunately, many will blame rigid governance as a restricting factor.

The well-documented and duly approved sourcing strategy may resolve that problem. 

It will reflect your logic throughout the entire sourcing project and make it hard to accuse you of disobeying the governance as long as the reasons are reflected there.

Let's look at a sourcing strategy not as a compulsory element of the strategic sourcing process but as an enabler of procurement initiative and innovation.

P.S. If you appreciate hundreds of hours invested in researching and writing this blog, you can buy me a coffee or subscribe for the membership by following this link. Thank you!

Buy me a coffee

                                          https://www.buymeacoffee.com/ukrsedo


Follow this blog banner
To keep receiving new insights and research, please subscribe here. 



More information on this and other exciting topics can be found in "The Technology Procurement Handbook." It represents 23 years of experience, billions of dollars worth of successful sourcing projects, and 1000s hours spent on research, analysis, and content creation for the most demanding professional readers.
The Technology Procurement Handbook front page
 



Comments

Post a Comment

Popular Posts

The Importance of Supply Chain Collaboration

Image
  Why is supply chain collaboration essential? Once, I was asked what makes the supply chain important to a company. Our profession may not be rocket science. Other peers around the company overlap with us in their functions - Technology tends to manage suppliers , Finance owns the demand planning and budgeting , and Sales and Marketing monopolize the end-customer value chain.  These and other colleagues do not always appreciate us; some believe they are even better at our job.  Shadow procurement, supply chain, and logistics have become standards for many companies.  However, some critical differentiators - like collaboration - justify the very existence of our profession!  The supply chain is the most collaborative function in the business.  We find peers everywhere, even behind enemy lines. We welcome any opportunity to form a cross-functional team with anyone who can bring business value through supply chain strategies, sales  and operations pl...
Read more

The National Program of IT as the Alter-Ego of Procurement

Image
" One of the worst and most expensive contracting fiascos in the history of the public sector ." Some real-life cases only require a little reflection to understand that the project was predefined for failure well before its launch. Can we make appropriate conclusions to prevent that from happening again?  The first step is to deepen our study of such cases beyond populistic cliches.    NHS IT System (2001-2011) The national program for IT in the health service is the largest civilian computer project in the world. It was spawned in late 2001 and early 2002.  A far-reaching vision set out a program to transform people's healthcare experiences. Hospital admissions and appointments would be booked online—the choose-and-book system. Pharmacists would no longer struggle with GPs' indecipherable handwriting, and drug prescriptions would be handled electronically. Politicians set the duration of the program at two years and nine months from April 2003 until December 2005...
Read more

Scrabbling through Odd Technology Terms

Image
As I constantly update my course materials on Technology Procurement , I encountered some odd species of I.T. and technological jargon, which I wanted to share in this post.  Some are strange, others puzzling. Still, all of those are useful to know if not practiced. I cannot promise revelations, but it is an excellent addition to your Scrabble vocabulary, as a minimum.  Disintermediation Disintermediation is the process of removing intermediaries from a supply chain. In the procurement world, this means directly engaging with manufacturers or service providers instead of going through distributors, agents, or other middlemen. By eliminating these intermediaries, companies can achieve cost savings, better communication, and greater control over their supply chain. Example : Farm-to-table .  In the farm-to-table movement, restaurants source ingredients directly from local farmers rather than through wholesalers. This direct relationship can ensure fresher produce, support l...
Read more