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Solution
Executive Summary
In light of NUPCO’s implementation of remote labour during the COVID-19 pandemic, this evaluation seeks to investigate and compare various sourcing strategies inside the organization. Kraljic analysis, Mendelow’s stakeholder analysis, the business hierarchy of needs, and SWOT analysis were used to evaluate the different sourcing methodologies. In addition, the Peter Block Grid categorizes stakeholders according to their position and interest concerning the various sourcing strategies.
Using Carter’s 10Cs method, we compared and contrasted the various sourcing strategies employed by the NUPCO organization in the IT systems spend category. According to the results, if NUPCO wants to keep its dominant position in the KSA procurement, logistics and Supply chain management and maximize earnings, it should adopt a strategic sourcing approach. Among the various sourcing strategies, one can either engage in multiple suppliers (multiple sourcing), a single supplier (single sourcing), a monopolistic supplier (sole sourcing), or a dual supplier (dual sourcing) whose demands may be at odds with one another.
In summary, the following are suggested methods of sourcing for IT systems within the NUPCO organization:
- Determining, based on the characteristics of spend category, the optimal sourcing strategy
- Giving careful attention to and prioritizing technology integration in procurement policies.
- Simplifying the purchasing technique and considering the requirements of all revelries involved.
- Improving information flow and supporting sourcing strategies like RFQ, RFP, negotiation, and e-auction in the present Ariba/SAP system.
Table of Contents
1.1 Organisation Background. 2
1.2 Selected Category of Spend and Positioning. 2
3.2 Application of Sourcing Approaches in NUPCO Context 3
2.1 Kraljic Analysis Method. 6
2.2 The Hierarchy of Business Needs. 7
2.3 Management of Stakeholders. 8
3.0 Sourcing Appraisal Checklist 11
3.1 Information Technology (IT) Spend Supplier Evaluation. 11
4.0 Conclusion and Recommendations. 13
Figure 1:National Unified Procurement Company (NUPCO) 7
Figure 2:NUPCO Sourcing Approaches and the Maslow Hierarchy of Needs 9
Figure 3:Mendelow Matrix Stakeholders analysis 10
Figure 4:Peter Block’s Stakeholder Categories 11
Figure 5:Applying the 10Cs Technique to Supplier Appraisal 12
1.0 Introduction
1.1 Organisation Background
In this assessment, the National Unified Procurement Company (NUPCO) has been identified for evaluation. Established in 2009, NUPCO organisation currently hold approximately 1.5 billion SAR as capital. It is a current leader in Saudi Arabia (KSA) procurement, logistics and Supply chain management. According to NUPCO (2023), they lead in pharmaceutical, medical devices and supplies for government hospitals in Saudi Arabia (KSA). The current ownership of NUPCO is the Public Investment Fund which was initiated for achieving cost spending efficiencies and an improved scope of healthcare services provision to the governmental hospitals. At the start, the company capital was 20 Billion SAR annually, primarily meant to purchase supplementary medication and medical devices for MOH, National Guard MOI and university hospitals and specialised hospitals. Owing to the broad scope of NUPCO operations, they operate different contracts meant to ease on their operations. In this regard, the embrace of an appropriate terms and conditions is essential and critical for achieving an improved performance by the organisation in the highly competitive business environment. Their procurement and supply department must be in place to buy the right IT system for investment to succeed. As a result, you get the most bang for your buck.
1.2 Selected Category of Spend and Positioning
To increase productivity and cut expenses, the NUPCO organisation is purchasing 60 separate IT and technological systems (NUPCO, 2022). NUPCO must employ the best sourcing strategy and perform a comprehensive supplier analysis to find the best possible vendors for these systems.
The NUPCO organization can better manage and control its supply and procurement strategies if it can determine the optimal sourcing strategy for each expenditure category. Tools like the Kraljic analysis and the Business Hierarchy of Needs can be used to gain insight into the organization’s value chain needs, demands, and supplies. To further comprehend the potential effects of alternative sourcing strategies on NUPCO’s stakeholders, Mendelow’s Stakeholder Analysis Matrix can be used.
3.0 Sourcing Approaches
Multiple Sourcing– As defined by Zare Mehrjerdi and Shafiee (2020), multiple sourcing entails using many vendors to meet an organization’s requirements. This makes the most incredible intellect in a free market where companies can easily exchange goods and services and act as suppliers to rival firms.
Single Sourcing– CIPS (2020a) defines single sourcing as “relying on a single supplier to meet an organization’s requirements across an entire category of expenditures.” Gaur et al. (2020) suggests this could lead to a greater focus on technological innovation and increased capital spending.
Dual Sourcing– Dual sourcing uses two different vendors to deliver the same service or commodity. To safeguard against supply disruptions, this strategy diversifies the supplier base, as stated by Gupta and Ivanov (2020). The two companies involved in the dual-sourcing arrangement are bound by contract to deliver different products. This can be very helpful considering the possibility of a disruption in supply chains in the sharing economy.
Sole Sourcing– In dual sourcing, two different companies are used to provide the same good or service. This strategy diversifies the supplier base, as stated by Chauhan et al. (2022, to safeguard against supply disruptions. In a dual-supplier relationship, both vendors must deliver products that differ from one another. This can be especially useful in the sharing economy, where disruptions to supply chains are possible.
3.2 Application of Sourcing Approaches in NUPCO Context
Multiple Sourcing
An organization like NUPCO uses this strategy frequently in the IT budget area by contracting with numerous vendors, including Microsoft, IBM, Apple, and HP, to enable remote work during the COVID-19 epidemic. Cost, quality, reputation of the organization, and previous interactions with the supplier all play a role in the final decision.
There are two key reasons why organizations prefer the use numerous sources of supply:
- The position of the IT systems to be delivered is a significant consideration, with capacity being vital for ease of handling.
- Concentration of demand over multiple vendors assist in finding the best price and reliable service. NUPCO must inform the vendor of the IT system’s price range, expected quality, and delivery schedule. This aids in reducing expenses while maintaining a high level of service delivery.
When buyers use multiple sources, they have more options, which is only one of many benefits. The supply chain will have fewer bottlenecks because the buyer has options if one provider doesn’t produce as expected. Competition, innovation, and adaptability in delivery can all benefit from having several suppliers (CIPS, 2014). However, there are drawbacks to consider, such as time and effort required to keep records and the expense of finding various suppliers that meet the buyer’s expectations, especially in cases where an electronic catalogue is not used to showcase the products. The system’s technical and operational quality necessitates using multiple sources in IT procurement. The NUPCO organization’s HSE division can keep things safe and sound through supplier portals and market exchanges. These online marketplaces facilitate communication between buyers and sellers by providing easy access to relevant data. Microsoft, IBM, Apple, HP, and Samsung are just a few companies that potentially offer services to NUPCO.
Single Sourcing
Single sourcing is used at NUPCO to save money, speed up communications with essential stakeholders, promote environmentally friendly procedures, and simplify the buying process overall. Multiple considerations, including terms and conditions, unit costs, delivery capabilities, and the quality of IT systems, go into the final choice to employ single sourcing. Single sourcing’s many advantages include lowering the likelihood of adapting to shifting supplier fashions and encouraging the development of a mutually beneficial, long-term partnership between purchasers and providers.
Single sourcing can reduce time and money spent on procurement while still providing benefits. However, if you rely too heavily on one provider, you can avoid experiencing disruptions if they cannot meet their commitments.
Single sourcing is most useful for NUPCO when purchasing boats, hiring, and machinery since it enables the organization to forge close bonds with its suppliers and have them meet its unique needs. Value is added, and the organization can strike a better balance between its procurement needs and the price and quality of the products it buys. Procuring health and safety equipment through a single source is advantageous since it fosters enduring vendor partnerships. On the other hand, using several different vendors could make it more difficult to tailor services to the specific requirements of your business.
Dual Sourcing
Dual sourcing has many benefits, such as lowering the risk of depending on a single supplier, saving money through increased competition and innovation, and fostering incredible organizational growth and development. Other benefits of using many suppliers are better quality, control and cost management. The potential for economies of scale can be mitigated by splitting the volume of products and services between two vendors, another benefit of dual sourcing. However, when dual sourcing is used, there is the potential for lost time and resources and a reduction in economies of scale.
NUPCO should prioritize collaborative strategies with procurement and enhance its sourcing strategy following its requirements to realize the full potential of dual sourcing. This is an ideal solution for bottleneck items, which are less profitable and more risky due to the possibility of over-ordering. By collaborating with existing competitors, NUPCO might use dual sourcing to save money on IT purchases.
Sole Sourcing
For some pieces of equipment used at NUPCO’s procurement, logistics and Supply chain management that may be one-of-a-kind due to factors like the brand, technological level, and specific usage requirements—sole sourcing may be the only option.
Sole sourcing has the benefit of streamlining the purchasing procedure by requiring only one source or vendor. However, there are some drawbacks to using a single provider. Due to less competition, the quality, dependability, and longevity of contacts with suppliers may all need to improve. Having a single supply source increases the risk of price gouging and service degradation in the event of a supplier failure.
When traditional physical paperwork is obligatory for procurement techniques, NUPCO recurrently resorts to sole sourcing. For instance, block chain technology can significantly improve efficiency when used in the ordering and tendering processes.
2.1 Kraljic Analysis Method
The Kraljic matrix evaluates the potential dangers associated with sourcing commodities and incorporating them into the supply chain (CIPS, 2019). It can be used to determine the best sourcing method to reduce supply chain risks and maximise the quality of business partnerships.
Figure 1:National Unified Procurement Company (NUPCO)
In relation to the NUPCO selection of sourcing strategies, Figure 1 includes:
Leverage strategy, It is finding many sources for a product or service and then haggling for better terms and lower prices. Regarding IT procurement in NUPCO organizations, this strategy can assist in mitigating supply risks and maximize the organization’s bargaining position. It’s possible to save money and lower supply risks by using multiple sourcing strategies in this area of spending. Since IT investment has a strong potential for impacting earnings and may contain low-level supply risks, NUPCO should seriously consider its sourcing strategies in light of the current and prospective COVID-19 pandemic (Tip et al., 2021).
An example of a strategic item in NUPCO is the technology utilised in administrating cultural, procurement, logistics and Supply chain management. Due to the high probability of supply disruption, we use only one source rather than sole or dual sourcing for these products. Confidentiality in managing the suppliers of these goods is essential for reducing supply risk. Locked-in solitary or double source is used to accomplish this (Garzon et al., 2019).
Bottleneck items –Those products and services have a medium effect on the bottom line of NUPCO operations but substantial supply chain risk. Due to their monopoly over certain commodities, providers may wield considerable influence in this setting. The procurement team may avoid the pitfalls of over-reliance on any single supplier by maintaining relationships with a wide variety of vendors who can fulfil the needs in this area of spending. As shown by Shah and Bin (2021), this strategy can aid in lowering the risks associated with relying on a single supplier for these vital components.
Non-critical items– Stand in for products and services that may be obtained from several different sources, posing a lower level of risk than bottleneck items (Attinasi et al., 2022). For these types of purchases, a single-sourcing strategy can be implemented to simplify procurement while still considering technical and commercial factors. By utilizing electronic tendering techniques like electronic requests for quotes (E-RFQs) and online specifications, cutting-edge procurement technologies like ARIBA or SAP can help NUPCOs standardize on non-critical commodities. The method outlined in CIPS Notes (2021) can facilitate the streamlining and modernization of the procurement procedure.
2.2 The Hierarchy of Business Needs
The strategic positioning of the emphasized spending classifications should be considered in light of the business hierarchy of needs model (CIPS, 2020). High levels of competition and related costs place information technology (IT) items and machinery in a particular category, making these factors crucial when deciding on a sourcing strategy. Figure 2: Maslow’s hierarchy of requirements inspires the corporate hierarchy of needs model (Bozyiğit, 2021)
Figure 2:NUPCO Sourcing Approaches and the Maslow Hierarchy of Needs
Figure 2 shows the many requirements that must be prioritized in the NUPCO sourcing approach. When it comes to IT sourcing, for instance, it’s essential to focus on product quality while also thinking about how it will meet the company’s goals and reduce the risks connected with NUPCO operations. Kraljic’s analysis suggests that when purchasing IT, it’s essential to consider how much time and money the purchase would require and how many different vendors must be contacted. Duygun and Şen (2020) found that having significant purchasing power led to price stability and the signing of long-term contracts with multiple vendors.
Establishing connections with numerous suppliers, including local options, can assist in reducing exposure to supply chain risks. For instance, rather than relying entirely on overseas suppliers, NUPCO has successfully collaborated with local ones. In addition, contractors and vendors in KSA can improve their services by working more closely with government agencies.
2.3 Management of Stakeholders
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