Why business should embrace strategic sourcing
No man is an island unto himself. And the same must be said of any company.
All businesses need to partner with best-of-breed players to survive, let alone thrive. And that’s never been more true than in today’s dynamically changing world. But, if we are honest, it’s a strength not many companies possess or value highly enough. This needs to change and quickly.
What strategic sourcing can do for business
Having spent many years working to improve standards, sharing and capability in the industry, the evidence of Global Sourcing Association (GSA) research shows all best performing companies now have a recognised strategic sourcing function; a team of highly skilled professionals that transcend the business, operations, technology, finance and procurement. Organisations that run these divisions as isolated units are working in an antiquated way, focused more on cost-cutting than value creation, which is a very short-term strategy.
The strategic sourcing professional understands the needs of the business, and appreciates new and emerging technologies, be that artificial intelligence, automation, analytics or blockchain, and how they can be brought into a sourcing arrangement at any time. They are also focused on how partnering in an open, honest and strategic way with a chosen selection of players, from across the world, can add significant value to a business.
However, rather than bang on about the virtues of good partnering, I’d prefer to bring this to life. At the GSA we have seen some great examples.
The BBC, widely recognised as a very mature user of outsourcing, is leading the way in its partner programmes through the development of a segmentation model that weights its partners based on their strategic value-add and overall contribution to business, rather than by spend and savings potential.
Global pharma GSK won GSA’s Innovation Award in 2018 due to its dynamic approach to strategic partnering. When GSK’s competitor landscape exploded and their market position fell from fifth to ninth globally, the board knew it needed to drive a dynamic change agenda.
GSK established a specialist cross-functional sourcing team with a completely fresh modus operandi focused on true innovation, strategic partnerships and agile ways of working. The length of the RFP (request for proposal) process was cut to a quarter, contracts reduced to merely a few friendly pages and payment terms slashed.
Strategic partnerships vs. outsourcing
At the same time, they engendered a culture to partnering based on transparency, trust and co-investment to attract the most dynamic of companies. This approach has enabled GSK to reap dividends in cost-savings and value creation.
So, is this really different to outsourcing? No. Outsourcing was evolving to this model and the best in the industry are embracing it. Unfortunately, despite a few isolated examples of best practice, too often the government has revealed itself as both an unintelligent customer of traditional outsourcing and as a political blame merchant seemingly hell bent on irreparably damaging the reputation of outsourcing in the UK.
Once the global leader, we now languish just within the top 20 performing countries. Government’s attitude to and use of outsourcing has damaged its reputation to the point it is perceived as an undesirable industry to work in. As such we have a dearth of talent available to drive dynamic programmes of change.
In response, under the direction of Jim Hemmington from the BBC and Joe Williams from Aviva, GSA is leading a programme to attract and upskill talent in strategic sourcing to promote the great virtues of the profession and the opportunities open to individuals interested in pursuing a career. In addition, Mark Devonshire from NTT Data is leading a programme to publish a code of conduct for how the industry partners with startups and small and medium-sized enterprises.
The industry is showing itself capable of change. Can the UK government embrace it and recognise that the future of sourcing is strategic partnering?