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Solution
Executive Summary
In the current report, different sourcing approaches have been identified for explaining their use on categories of spend in Eco2Solar Organisation. The category of spend selected for this assessment is Solar Panels as they advance their super-efficient solar energy which is durable, versatile and minimising wastes and maximising on energy usage. In the analysis section in this section, the category of spend identified is compared with their purchase of health and safety equipment (HSE), logistics, solar PV roof integration system and office materials. Further, this assessment has exploited the use of different techniques including the Kraljic analysis tool, Mendelow’s analysis targeting stakeholders analysis and the business hierarchy of needs. Further, for identifying the prevalent threats and opportunities for Eco2Solar to leverage on, the SWOT analysis has been selected. Part of this include the Peter Block Grid which has been applied for understanding different stakeholders interest in various selected sourcing approaches in light of their position. The sourcing approaches include single, sole, dual and multiple.
In the part of supplier appraisal for the Solar Panels, Carter’s 10Cs technique has been used. From the findings of this evaluation, it note on the necessity for Eco2Solar investing in strategic sourcing strategy for guaranteeing dominance of the organisation in the UK Solar energy sector and acquiring relevant profits. For different sourcing approaches evaluated, multiple sourcing which engages immense suppliers with single sourcing involving one supplier has been identified. The use of sole sourcing include engagement of a single monopolistic supplier involved in the supply market while dual sourcing include suppliers who possess conflicting needs.
At the end of this report, various recommendations have been generated and include;
- Selection of the most appropriate sourcing strategy guided by varying features of selected spend category
- To prioritise evident policies in procurement areas while ensuring technology is integrated in this process
- Simplifying the overall procurement strategy and ensuring entire stakeholders interests are a priority in the process
- Integrate technology in various product life cycle including the Request for Quote (RFQ), Negotiation e-Auction. Today, Eco2Solar Ariba/SAP system to improve flow of information level in selected sourcing approaches
Table of Contents
1.1 Eco2Solar Organisation Background. 4
1.2 Selected Category of Spend and Positioning. 4
1.4 Business Hierarchy of Needs 6
3.0 Sourcing Appraisal Checklist 13
3.1 IT Spend Area Supplier Appraisal 14
4.0 Conclusion and Recommendations 16
1.0 Introduction
1.1 Eco2Solar Organisation Background
Eco2Solar has been in active operation from 2007 with an intention of addressing the climatic change threats. This is by reduction of CO2 emissions and fuel shortages by facilitating use of solar energy (Hutchens, 2019). Eco2Solar has been for a long period been offering solar energy solutions for new built homes and commercial installations. The major customers of the organisation are Barratts, Taylor Wimpy, Linden Homes, David Wilson and Lovells. As a best practice for the organisation success, in their past practice, the projects by the organisation has included powering the health centers (40%), schools operations (50%), care homes (30%), and large apartment installations (20%). The organisation profitability of upto £10 million has been informed by recent engagement with customers including the Worcestershire County Council and Sanctuary Housing which occupy 50% of the organisation entire spend category. This has been instrumental in the organisation achieving its objectives. Apart from this, they have managed to install multiple domestic constructions entirely in Midlands and more.
In line with this introduction, the purpose of this assessment identify 4 sourcing approaches and an explanation of their use in the category of spend in Eco2Solar organisation. At the end, using a single category of spend, a supplier appraisal checklist has been made.
1.2 Selected Category of Spend and Positioning
The specialism of Eco2Solar company is in solar photovoltaic panels. Owing to the fact that the organisation does not have a manufacturing unit of their solar panels, they partner with different supports to procure different categories of solar panels and other equipment. By doing this, they become appropriately positioned in producing increased quality and cost-efficient solar energy panels in line with set specifications and quality panel. This is done through an involvement of different stakeholders mandated to ensure there is a high-quality products and services, capacity development strategy and an increased in the entire spend by Eco2Solar organisation.
Therefore, for Eco2Solar organisation, they ought to note on the most appropriate sourcing approach in their various spend categories evidencing success in controlling the entire supply and procurement strategy (CIPS, 2019). This is informed by their needs, demand, and supply process noted by an organisation value chain. The Kraljic analysis and their business hierarchy of needs have similarly been reflected. In order to establish sourcing approaches which influence the Eco2Solar organisation, the stakeholders mendelows analysis matrix has been used.
1.3 Kraljic Analysis Tool
Kraljic matrix is a tool which is applied to establish risk from the supply of materials from suppliers as part of the supply chain (CIPS, 2019). This is applied in establishing the most appropriate sourcing strategy to create the best relations and ensure success in risks mitigation (see figure 1);
Figure 1: Summary of Kraljic Analysis Matrix
Source: CIPS (2019)
As illustrated in figure 1, in line with figure 1, in regard to Eco2Solar option of the most appropriate sourcing approach include;
Leverage– In this category, multiple suppliers represent the incurred end product costs and reduced supply risks. Solar Panels procurement in Eco2Solar is best positioned in this category. Eco2Solar being the buyer need to prioritise on high-quality negotiations to save on costs with a substantial procurement strategy used. Multiple sourcing approaches are applicable in ensuring Eco2Solar is progressive in terms of their leverage on the buyer power relations. In Eco2Solar organisation, they need to prioritise on this by ensuring that they bid for the lowest prices in procurement and eventual shipping. The Solar panels spend category specifically in today COVID-19 pandemic and future practice affect the organisation profitability and lower supply risks (Harvard Business Review, 2018).
Strategic Items– A good example of the spend area in this category include Eco2Solar logistics and solar PV roof integration system. These have high-level supply risk. Hence, a single supplier is involved as opposed to sole or dual sourcing. Ensuring the process is confidential in regard to the supplier relationship management in Eco2Solar is important to advance a locked-in sole or dual sourcing. The rationale of this is ensuring minimum supply risk is incurred (Forbes, 2017).
Bottleneck Items– The spend area in this category is health and safety materials which are characterised with a significant profit implication on Eco2Solar organisation success owing to increased risks in supply chain. According to Zhou and Wan (2017), the best practice in sourcing approach is reducing negative impact owing to inappropriate positioning. To mitigate the varying issues incurred in this spend category, procurement department would include referencing on multiple suppliers.
Non-critical items– For this category, this is inclusive of the products and services readily available in abundance with immense suppliers in place with readily available alternatives (Meng et al., 2018). For Eco2Solar organisation practices, for the category, single-sourcing strategy is best used. To solve potential complexities of standardisation in this level, modernisation by facilitating E-Tendering is essential including the E-RFQs (Electronic Requests for Quotation) and online specifications or emails to likely suppliers used which are currently not in place by Eco2Solar (CIPS Notes, 2021).
1.4 Business Hierarchy of Needs
In line with the evident categories of spend strategic positioning, it is important using business hierarchy of needs model (CIPS, 2020). The Solar Panels and office materials are categorised as having increased competitiveness and incur immense costs being the initial sourcing strategy selection need. Business Hierarchy of Needs (B2B International, 2020) is applied and guided by Maslow’s Hierarchy of Needs (see figure 2) (Stewart et al., 2018);
Figure 2: Maslow Hierarchy of Needs in Eco2Solar
In Eco2Solar approach, meeting varying needs as summarised in figure 2 is a priority. For example, for Solar Panels sourcing, quality is priority and its impact to business needs and reduction of Eco2Solar risks considered. For Kraljic analysis, solar panels sourcing involve multiple suppliers. In line with Kamugisha (2017), higher buyer power is leveraged contributing to securing of coasts and to achieve long-term contracts needs from different involved suppliers.
Additionally, management of supply risks is possible to solve engagement level with suppliers alternatives for the bottleneck items. An appropriate example is where Eco2Solar organisation source localised sourcing as opposed to internationally. Further, use of various contractors and vendors in various spend categories promote services collaboration with England energy sector government institutions.
1.5 Stakeholders Analysis
In this analysis, Mendelow Stakeholder’s Analysis Matrix is applicable (CIPS, 2018). This is summarised in figure 3;
Figure 3: Stakeholder Analysis Matrix in Eco2Solar
Source: CIPS (2018)
As evidenced in figure 3, the appropriate findings in sourcing approaches include;
High-Interest, High-Power– The solar panels end-users and Eco2solars installers are important for selecting the sourcing approach adopted. Since they are managed closely, misunderstanding or sourcing approach impact change altering process.
Low-Interest, High-Power-Stakeholders are legal department, finance and UK admin involved actively in selecting suppliers. Therefore, they are kept satisfied with sourcing approach used.
High-Interest, Low-Power– Interests of stakeholders are on information for most appropriate sourcing approach used. The P&SM, board of management need minimum efforts albeit of need to influence sourcing approaches used.
Low-Interest, Low-Power– IT team, admin and security in Eco2Solar are important to be kept informed. Therefore, the most appropriate sourcing approach is essential to meet distinct demands with organisation maximum gain.
In line with the different identified stakeholders, Peter Block Grid Leadership Center (Leadership Center, 2020) is eventually used to arrange stakeholders on basis of their position (see figure 4);
Figure 4: Peter Block’s Stakeholders Categories
Bedfellows (High Agreement & Low Trust)– This is a hard to engage group in sourcing approaches selection since their interest is to operate in long-term commitment. To select the best sourcing approach, communication is a priority.
Allies (High Agreement & High Trust)– Optimum support is provided to stakeholders with vision shared for achieving organisation goals and objectives. Multiple sourcing is most appropriate in this regard.
Opponents (Low Agreement & High Trust)– Stakeholders are supposed to be offered with a detailed and constant feedback, honesty and option for best sourcing strategy.
Adversaries (Low Agreement & Low Trust)– Often, change process need Eco2Solar organisation to settle on the hardest sourcing approach decision. This is by first fitting their interest.
1.6 SWOT Analysis
SWOT analysis is used to identify strengths and weaknesses internally and external opportunities and threats (CIPS, 2020). For SWOT analysis, this is illustrated in figure 5;
Figure 5: Eco2Solar Organisation SWOT Analysis
In figure 5, strengths and weaknesses note on the areas of Eco2Solar company leveraging on obtaining the best practice of leveraging on competitive advantage. This is specifically the case in regard to the suppliers relationship and existence of a significant suppliers pools. The risks and costs incurred are prioritised in selection of best sourcing approach. Opportunities and threats in external environment identify the relevance of business environment for an entity practice. The most appropriate sourcing approach ought to be facilitated by need to embrace modernised technologies, mitigation of COVID-19 pandemic impacts and lack of business-centered procurement strategy.
2.0 Sourcing Approaches
2.1 Multiple Sourcing
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