Commodity sourcing strategies: supply management in action

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Authors
Rendon, Rene G.
Subjects
Advisors
Date of Issue
2005-01-31
Date
2005-01-31
Publisher
Monterey, California. Naval Postgraduate School
Language
Abstract
This research report discusses the transformation occurring in the procurement and purchasing function, specifically as it applies to developing procurement strategies and the implementation of commodity strategies as an application of strategic sourcing. The literature review presents the theoretical framework surrounding the transformation of purchasing to supply management along with its major developments such as integrated supplier relationships, total ownership costs, cross-functional teams, supply chains, e-procurement systems, and strategic sourcing strategies. Strategic sourcing and developing sourcing strategies are discussed and include the Kraljic model for determining the best type of procurement strategy for specific products or services. Commodity sourcing strategies are discussed in conjunction with Lasseter's seven-step process for developing commodity sourcing strategies. The application of strategic sourcing in the commercial sector is discussed using examples from industry, along with applications within the Department of Defense. Some challenges to strategic sourcing identified in the report include access to the required spend data, highly fragmented supply base, and government procurement goals. The report also identifies best practices such as establishing common processes and tools, using cross-functional teams, ensuring adequate team sponsorship and authority, and aggressively managing purchasing requirements. The report concludes that strategic sourcing initiatives have resulted in significant cost reductions, increases in productivity, quality improvement, and return on investment. DoD's strategic sourcing initiatives have also resulted in significant savings, albeit with some obstacles and barriers yet to overcome.
Type
Technical Report
Description
Acquisition research (Graduate School of Business & Public Policy)
Department
Identifiers
NPS Report Number
NPS-CM-05-003
Sponsors
Funder
Format
vii, 37 p.: ill. (some col.);28 cm.
Citation
Distribution Statement
Approved for public release; distribution is unlimited.
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