Strategic Sourcing

It is the responsibility of Purchasing Services to develop strategic sourcing initiatives to leverage the University's annual buying power and cost containment opportunities without imposing restrictions on manufacturers or products required by faculty and staff.

Benefits of Strategic Sourcing Initiatives

• Total Costs Are Important
  It's not just about price, but quality, service, delivery and all the aspects that make up the total cost or value.
• Analytically Rigorous
  The strategic sourcing managers do extensive research to determine the optimum type and quantity of product or service needed, the marketplace pricing and service benchmarks, and the competitive advantages offered by all potential suppliers, not just the incumbent supplier.
• Broad-based Input
  The decision to award a supplier relationship is not done just by the purchasing organization. Strategic sourcing teams are cross functional, so suppliers must meet with a group that's armed with facts and looking at more than price.

How Our Strategic Sourcing Initiatives Work

• Purchasing Profiles & Prioritizing
  The strategic sourcing teams gather as much information as possible about what, when and how the institution should purchase the desired products or services. This involves internal interviews, in-house surveys, as well as marketplace surveys.
• Identify Strategic Sourcing Products
  Next is developing specifications for products to be purchased. This can be very detailed, identifying exactly how a product is used and which features are most and least important.
• Solicit Bids & Negotiate with Suppliers
  Once the sourcing team understands what users need, it identifies the "universe" of potential suppliers, big and small. A detailed Request for Proposal (RFP) is usually issued detailing exactly what information is needed from potential bidders, even incumbent suppliers.

Supplier Strategies for Success

• Develop Competitive Value-based Pricing
  Pricing plays a role in any supplier selection criteria, but many suppliers incorrectly assume it is the most important part of a formal proposal. Purchasing Services is interested in more than the price and considers the overall cost of products or services to the institution.
• Be Innovative
  Purchasing Services is not only interested in new products and services that deliver a competitive advantage, but also new ways of doing business. How quickly can the supplier adapt to changing customer requirements at Penn? Does the supplier use the latest technology? Does the supplier pass along the benefits of its cost reduction initiatives?
• Emphasize Support and Service
  One competitive advantage for suppliers in strategic sourcing is strong customer service and support. This ranges from how the supplier answers complaints to whether it guarantees levels of performance, such as on-time delivery and damage-free shipments.
• Form Strategic Alliances
  Small and diversity owned businesses can effectively compete against larger, national competitors by forming alliances with similarly innovative businesses in order to meet the service, technology and financial requirements of the institution.
• Invest In Technology
  One way many large businesses reduce supply chain costs is with electronic commerce and better use of technology. This cost efficiency does not go unnoticed by the institution.
• Promote Proactively
  A key to success at Penn is the innovative and proactive marketing of products, services and added value. Supplier must also keep Purchasing Services up-to-date on developments within the company that may impact the business relationship.