(Solution) CIPS APGM Strategic and conventional sourcing processes and role in category management

Solution

 CIPS APGM Strategic and conventional sourcing processes and role in category management

4.1 Definition of strategic and conventional sourcing

In CIPS (2023a), strategic sourcing is defined a “process of creating efficiency in the overall spend categories, minimising supply risks with an improved supplier selection and giving visibility to pricing and forecasting”. This is by formalising gathering, analysis and use of information for assisting Oxy organisation to align procurement strategy with goals and secure best positive value. Conventional sourcing on the other hand is defined as sourcing goods and services at the lowest possible cost per unit. Hence, conventional sourcing prioritise on supplier pricing with price being regarded as the only component of strategic sourcing (CIPS, 2023a).

4.1 Identification of approaches to sourcing; alignment to Oxy categories

With the two strategies being the same since they need to make sure cost savings is attained and achieve cost-based saving and source high-level quality of their procurement. Nevertheless, they are distinct in various dimensions.

Strategic Sourcing

In category management, strategic sourcing is inclusive of leveraging on PS&M data distinct from conventional sourcing (Yildiz Çankaya, 2020). Strategic sourcing is normally operating by adoption of the “pick-and-shovel work function” to source the best data important to achieve most appropriate market-based results. For example, considering Oxy organisation case, by use of strategic sourcing, Request for Proposal (RFP) contribute to multiple negotiations hence a detailed contract management and seamless practices. A case example is where Oxy organisation HS&E spend category involve a high of 100 suppliers adequately screened and engaged to assess appropriateness of spend amount. The best practice is as illustrated in 5 Rights Procurement Model (Nani & Ali, 2020) which influence Oxy organisation importance to increase scope of engaging all stakeholders and particularly their HS&E sourcing. This guide how the suppliers are compatible, credible, reliable and potentially embracing innovativeness and development. The sustainable relations are also achieved since they are guaranteed of commitment.

Figure 1:Extent and nature of change model

Source: Nani and Ali (2020)

For right quality, data on Total Quality Management, stakeholders including suppliers relationships from benchmarking of working with other organisations in Oman. For right quality, defective rate which is not supposed to be more than 10% of the entire sourced products and services is considered. This is with price required to be approximately 5% in average of all the suppliers offering Oxy with the HSE equipment.

This is unique from strategic sourcing where RFPs are well planned to engage different suppliers and offer them with clarity for opportunities offered. This lead to elimination of need to hedge proposed growth and aggressively implemented based on possibility with less fears of unknown or interpret ambiguousness in entire demands.

As evidenced in Frederico (2023), success in use of strategic sourcing is guided by need to leverage on deep analytics strategy including tight bid strategy to enhance the comparative bids analysis and eliminate identified ambiguousness. Most of the different engaged suppliers are significantly recognised in their practice. A negative feel after having lost a bidding due to inaccurate data analysis or costing amongst the competitors is a major setback.

Conventional Sourcing

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