Sourcing Approaches and Their Application to a Company's Category of Spend
Organisation background is energy retailer and energy generator.
Category of spend - Parts and Equipment
Task
Identify FOUR sourcing approaches, and for each one, identify and explain how you apply them to a category of spend within your organisation. (single, sole, dual supplier and multiple supplier)
Choose one of these categories and develop a supplier appraisal checklist.
Identify four sourcing approaches…
The task is asking you to identify FOUR sourcing approaches. Be careful not to fall into the trap of talking about Open Tendering, Restricted Tendering, Competitive Dialogue, and Competitive Procedure with Negotiation as sourcing approaches, because this is not what is meant, as they are procedures not approaches.
....and for each one , Identify and explain how you apply them to a category of spend within your organisation
What category / categories of spend will you use? Which models could you use to provide context to the category? Is it a strategic requirement? How might this impact on the sourcing approach you choose? What type of relationship might be appropriate with the supplier? How will this impact on the sourcing approach you choose? Which models will help you to understand the number of suppliers and the level of competition in the marketplace? How will this help you to determine which sourcing approach is appropriate? Is the marketplace a monopoly / oligopoly / perfect competition?
What are the strengths and weaknesses of each sourcing approach both generally, and specifically when applied to your category? Are there any opportunities for your organisation? What are the threats? What model could you use?
Choose one of these categories and develop a supplier appraisal checklist
NOTE Remember the difference between selection criteria and award criteria.
What areas should the supplier appraisal checklist cover? What areas does your appraisal checklist cover? Why? Are there any gaps? What impact does this have? How could you address this?
Which model could you use? Are any areas more important than others in the context of the category of spend, and should possibly be weighted? Are there any specific public sector requirements for supplier appraisal checklists?
NOTE make sure that you include the relevant question from your supplier appraisal checklist in the main body of the assignment where you are discussing and analysing it.
Sourcing Essentials
Student’s Name
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Lecturer’s Name
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Sourcing Essentials
Sourcing is a fundamental strategy in business as it ensures that organizations receive quality, reliable, and cost-effective products or services from suppliers. It involves identifying, evaluating, and selecting suppliers with the best value. The sourcing process can be very complicated and may involve multiple procedures, depending on the nature of the product or service being procured. This assessment examines the different sourcing approaches and their application to energy company’s parts and equipment spend category. The sourcing approaches are instrumental in the growth of an organization. They play a significant role in supply chain management and decision-making in regard to selecting the supplier. Additionally, the paper develops a supplier appraisal checklist for the selected spend category.
Sourcing Approaches
Sole Sourcing
Sole sourcing is an approach where organizations use only one supplier to procure products or services. Similar types of goods and services may exist, but only one supplier, for reasons of quality, expertise, confidentiality, urgency, standardization, and compatibility with existing equipment is the only acceptable source to meet a specified need (Eltantawy et al., 2014). The features of a monopoly supply market with high barriers to entry and no close substitutes often accompany sole sourcing. For that reason, the approach minimizes competition in the market since the organization has one supplier with the exclusive right to supply the procured products or services.
Limiting the number of suppliers to deal with also helps the company cut costs and risks. Other benefits include a faster procurement process, streamlined communication and coordination, relationship-building, and specialized expertise (Yildiz Çankaya, 2020). However, sole sourcing eliminates competition, which can reduce innovation, limit buyer options, and inflate prices. The absence of competitive pressure reduces supplier’s motivation to provide the best value (Vitasek, 2016). This approach also creates a dependency on a single supplier, which can be highly risky for business. For instance, challenges faced by the supplier can disrupt the company’s supply chain.
Application to a Spend Category
Sole sourcing applies to my organization, which generates, buys, and sells energy. This sourcing will be applied to the parts and equipment spend category by using the only available supplier for materials, parts, and equipment. This supplier is the only available option that can meet the quality and standard of the required products. Applying this approach in the company’s parts and equipment spend