Solution

Executive Summary

This report entails an evaluation of sourcing approaches and how they apply to various categories of spend. The discussion follows the selection of one category of spend, the mechanical cabinets, and a supplier checklist. The discussion reveals that Smiths Detection applies various sourcing approaches to specific categories of spend. The four sourcing approaches, including sole, single, multiple, and dual have various pros and cons, which are suitable foundations for their selection. The discussion below finds that there is no single and universal sourcing approach that fits all categories of spend. Instead, the sourcing methods are selected depending on various factors, including the availability of the suppliers and the type of product. For instance, sole sourcing is applied for products that are provided by only one company that cannot be easily substituted, while multiple sourcing entails the pre-qualification of various suppliers. The supplier appraisal method is Carter’s 10 Cs model, which involves competency, capacity, commitment to quality, consistency of performance, cost, cash and finance, communication, control of internal processes, CSR, and culture.

The recommendations to mitigate potential risks include

• Regular meetings with stakeholders
• Continuous environmental scanning to understand the existing situation
• A continuous review, and technological application to the procurement process to enhance efficiency.
• Simplifying the details of the tender and information integrated into the data of supplier appraisal inclusive of the stated details such as the standards and policies of the tender requirements

Table of Contents

Executive Summary. 2

1.0 Introduction. 4

1.1 Purpose of the Report 4

1.2 About the Company: Smiths Detection. 4

1.3 Procurement and Sourcing Department at Smith Detection. 4

2.0 Sourcing Approaches. 5

2.1 Single Sourcing. 5

2.2 Sole Sourcing. 7

2.3 Dual Sourcing. 8

2.4 Multiple Sourcing. 9

3.0 Supplier Appraisal Checklist 10

Carter’s 10 Cs Supplier Appraisal 11

4.0 Conclusions. 13

4.1 Recommendations 14

References 15

Figure 1:Suppliers’ Capability (Adopted from CIPS) 12

Figure 2:5 Rights of Procurement (Adopted from Murray, 2001) 14

Table 1:Advantages and Disadvantages of Single Sourcing. 7

Table 2: Advantages and Disadvantages of Sole Sourcing. 8

Table 3:Advantages and Disadvantages of Dual Sourcing. 10

Table 4:Advantages and disadvantages of multiple sourcing. 11

1.0 Introduction

Sourcing, according to the Chartered Institute of Procurement and Supply (CIPS) aims at identifying, assessing, and engaging the suppliers to meet the cost-savings objective and ensure the best value for the services and goods (CIPS, n. d, A). This is done through the tender process. According to Khan (2012), the tendering process is crucial to an organisation in ensuring an efficient relationship with the supplier and that the goods and services match the firm’s expectations. Among the significant factors in the tender process are quality, reliability, capacity, and flexibility. Also, the company should demonstrate sufficient skills and knowledge in accomplishing the procurement and sourcing goals. Ebekozien et al. (2022) espouse that lack of procurement knowledge and skills is the foundation of poor process that result in ineffective relationships, delays, and errors that may cost the production and manufacturing process.

1.1 Purpose of the Report

This report entails the evaluation of four sourcing approaches, including single, sole, dual, and multiple. From one category, the supplier appraisal checklist is applied.

1.2 About the Company: Smiths Detection

Smiths Detection is the global leader in security technologies, including threat detection and screening. The company’s aim is to protect infrastructure and the people to make the world a better and safe place. Through a robust network that involves suppliers and distributors, Smiths Detection ensures that it delivers remarkable solutions required to protect the world from illegal passage and threats, such as explosives, biological threats, contrabands, narcotics, and toxic chemicals (Smiths Detection, n. d, A). These activities are aimed at fostering the peace of mind, providing adequate security, and ensuring that there is freedom in movement, which the world is dependent on. The significance of the procurement and supply chain department for Smiths Detection is reflected in ensuring adequate supply of all the raw materials, including the scarce ones. In all the 5 research and development centres and 7 manufacturing sites, Smiths Detection ensures timely delivery of the raw materials, which is crucial in ensuring that the products and services are accomplished within the set time.

1.3 Procurement and Sourcing Department at Smith Detection

Smiths Detection procurement and supply chain department, led by a transformational leader, Nick Carter for a decade now focuses on three main areas of total value, resilience and relationships, and ethical alignment. In the financial year of 2021, crucial aspects that characterised the supply chain management process, included continuity through the COVID-19 pandemic, the inception of the transport management system, and a saving of £ 32.6 million (Smiths Detection, 2022). The sourcing process is guided by three millennium development goals, including number 9, 11, and 12. These include the industry, innovation, and infrastructure [9], sustainable cities and communities [11], and responsible consumption and production [12].

Smiths detection sources the products and services from various companies. For the unique products and raw materials, including the chips, the company has specialised on single company and has maintained profound and long-term relationships. Smiths Detection is strict on the quality and follows its terms and conditions to ensure that the products and services are flawlessly obtained (Smiths Detection, n. d, B). Smiths Detection acknowledges the importance of internal and external environment on the sourcing process and applies various tools and models in such regard. Among the common tool is the Porter’s five forces. Under the suppliers’ power, Porter’s five forces allows a company to examine its competitiveness, which is impacted by several factors, including the suppliers’ power (Isabelle et al., 2020). For Smiths Detection, the suppliers’ bargaining power is average since the company has established relationships with various suppliers for different products. The relevance and significance of environmental scanning tool, such as PESTEL in the company’s sourcing process and activities is to determine how the micro and macro environmental factors impact sourcing phases (Citilci and Akbalik, 2020). An example is the transport management system, related to technology aspect in the PESTEL.

2.0 Sourcing Approaches

A vast sourcing experience is vital in developing a unique strategy for the different categories. As described by Bienhaus and Haddud (2018), it is essential for companies to implement structured and pro-active sourcing strategies. This is essential in sourcing more effectively and assisting the company to enhance its financial performance.

2.1 Single Sourcing

This sourcing approach entails selecting one supplier responsible for all aspects of a specific requirement (CIPS, n. d., B). The single sourcing approach is selected for products that have high investments and where there is need for strong relationships between the company and the supplier. The main weakness of single sourcing is that it may result in complacency from the supplier and over-dependency (Li and Yao., 2021). A company selects a single supplier also based on the speciality and the rarity of the raw materials or service. For Smiths Detection, two areas where single sourcing is applied are the printed manual and plastic injection parts. The two areas involve a high level artwork and tooling design. Therefore, selecting a single supplier responsible for all the activities is founded on accountability and ensuring a high quality and flawless process. Smiths The benefits and challenges of single sourcing are summarised in table 1 below.

Table 1:Advantages and Disadvantages of Single Sourcing

As evidenced in table 1, single sourcing has a number of advantages. Drawing from sourcing the printed manual and plastic injection parts, Smiths Detection has established a profound relationship with the suppliers (Smiths Detection., 2022). This is based on ensuring high quality and specialisation of the artwork and tooling according to the company’s requirements. In single sourcing, the element of 100% control in the activities enhances the traceability of all activities and it is easy to identify the area of flaw. Primary to the challenges of this sourcing approach is the supplier’s power, which is high due to the full control of the process. Applying the Porter’s five forces, the high supplier power is attributed to the products and services being highly differentiated (de Goeij et al., 2021). This may also result in complacency by the supplier. Another disadvantage of single sourcing is the high risk of supply chain disruption, especially when there is a macro factor. An example is COVID-19 and how it resulted in closure of companies and disruption of the supply chain process. According to Zhu et al. (2020), the COVID-19 pandemic exposed various flaws in the supply chain activities, including time management, technology, and inadequate skills. In the case of Smiths Detection, dependent on one sourcing for the two categories of spend faces a significant risk of disruption in case the firm is unavailable.

2.2 Sole Sourcing

Sole sourcing entails a situation where only one supplier satisfies the requirements for the category of spend. As described by Dong et al. (2022), this sourcing strategy is based on monopoly supply market where there are no substitutes in close range. The main difference with single sourcing is that in the latter, there are potential substitutes but the company settles on the available one (CIPS, Larson and Kulchitsky, 1998, Van Weele, 2010). At Smiths Detection, sole sourcing is applied in the X-Ray Tubes category of spend. This is attributed to the supplier’s unique capabilities and expertise to provide X-Ray Tubes that are specialised and customised to Smiths Detection preferences. Besides, the sole sourcing process plays a crucial role in ensuring compatibility of the new designs and the existing one. The special requirements and standardisation process of the parts can only be done by one company, who is recognised and reputable in the market based on the research. From Kraljic purchasing portfolio model, sole sourcing is applied in the bottleneck items, which are characterised by high risks although the profitability can be low (Webb, 2017). The strengths are in the supplier’s hand. As described by Tip et al. (2021), there are few suppliers that behave oligopolistically. The advantages and

Table 2: Advantages and Disadvantages of Sole Sourcing

Sole sourcing is important for specialised products that cannot be easily obtained from the substitutes. Among the main advantages of the sole sourcing process is that there is effective time management, particularly in the decision-making process and tenders (Larson and Kulchitsky, 1998). This is anchored on the established and long-term relationship. Smiths Detection has developed a profound relationship with the X-Ray Tubes’ supplier. This has been instrumental in the ordering process and tracking the delivery. On the other hand, the sole sourcing approach places Smiths Detection in a precarious position when there are risks and challenges. For instance, in an instance where the financial position of the supplier becomes a challenge or there are delays, then Smiths Detection is on the receiving end as it is dependent on the company. Therefore, it is essential for Smiths Detection to evaluate the sustainability of the supplier’s activities, examine the potential effects of the supplier’s failure, and maintain the inventory at hand (Adesanya et al., 2020). The importance of a profound relationship with the supplier is necessary to avert the risks associated with the limited control that Smiths Detection has over the vendor.

2.3 Dual Sourcing

Dual sourcing involves selecting two suppliers to sustain a competitive environment and spread the procurement and supply chain management risks (Enventys Partners, 2018). Dual sourcing for a category of spend effectively addresses the risk of complacency and over-dependence on one supplier. Suppliers, therefore, have to contend with the company’s requirements for quality and timely products. The significance of dual sourcing is reflected in instances where there are shortages or one company faces capacity challenges that may affect the procurement process. The other supplier steps in and ensures that the company has the expected capacity. Dual sourcing for Smiths Detection is applied in the Conveyor Belts where there are two suppliers. One supplier is located in China, whereas the other is in Switzerland. The differences in country of origin are the quality issue and supply capacities.

Dual sourcing for the Conveyor Belts is described in the strategic items of Kraljic portfolio purchasing model which helps in classifying the products based on the profit contribution and supply risk (Montgomery et al., 2018). For the strategic items, they are characterised by high impacts and supplier risks. The products are crucial for the company; thus should made available. For the conveyor belt, the significance of dual sourcing ensures that they are available. As described by Chatterjee et al. (2020), the effectiveness of dual sourcing is anchored on communication and profound relationships with the supplier. For Smiths Detection, active communication is integrated in the sourcing process to maintain the dynamic coordination with the business demands. At Smiths Detection, the procurement professionals aim at minimising the supply risk in the conveyor belt category of spend by having two suppliers and at different regions. Notably, the conveyor belts are unique and cannot be sourced from locals. Working with the two suppliers help in stabilising the prices, delivery, quality, and promoting monitoring. The advantages and disadvantages of dual sourcing are summarised in table 3 below.

Table 3:Advantages and Disadvantages of Dual Sourcing

Dual sourcing is preferred for products that are highly profitable thus should be available. The selection of two companies to supply the product provides the flexibility of scaling the capacity. Also, the company can negotiate for better prices. In the case of Smiths Detection, the two suppliers for the conveyor belt have to ensure they remain competitive. This increases their innovativeness. Having two suppliers reduces the lead time between the shipments. However, the company loses control for the quality sustainability as the two companies have different production and delivery process. The inconsistency may affect the overall quality of the products (Sharp, 2018). Working with two companies further results in complexity in the production process and managing the relationship.

2.4 Multiple Sourcing

Multiple sourcing involves the use and pre-qualification of at least two suppliers for a category of spend. According to Mehrjerdi and Shafiee (2021), multiple sourcing is effective in promoting the sustainability and resilience of the closed-loop supply chain process and sharing information between the stakeholders. Multiple sourcing is applied to the low investment and less crucial products. Prequalifying various vendors provides an opportunity for selecting the best and averting the potential risks of shortages and poor relationships. In the Kraljic portfolio model, multiple sourcing is applied in the non-critical items, which are characterised by low risks and have low impacts on the firm’s profitability.

At Smiths Detection, the mechanical cabinet category of spend is approached through multiple sourcing. Notably, there are 3 AVL suppliers for these cabinets. The company involves a wide range of suppliers that work to meet the three suppliers’ needs and preferences. Engaging various suppliers mean that there are several considerations, including the competencies and quality, which should be enhanced to ensure the delivery of the services and products. The non-critical items’ tag of the mechanical cabinets mean that the company can operate without the cabinets and establish alternatives. The advantages and disadvantages of multiple sourcing include;

Table 4:Advantages and disadvantages of multiple sourcing

Multiple sourcing increases competition among the suppliers. This promotes the companies’ innovativeness, which results in delivering quality products and services. Having multiple suppliers also reduces the risks of supply in case a supplier faces capacity and financial issues. Smiths Detection also has access to diverse products and services, which ensures stability (Nguyen, 2021). Smiths Detection in multiple sourcing has a high power over the suppliers when applying Porter’s five forces. This allows the company to bargain for better prices. Through the supplier scorecards, Smiths Detection examines the suppliers’ performance, which helps them in examining the key supplier criteria, including the costs, time delivery, and quality of products. However, the company can lose time and costs during the negotiation process. There are also issue with information sharing as several vendors are involved. Multiple sourcing does not favour the small companies.

3.0 Supplier Appraisal Checklist

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