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Strategic Sourcing

What is Strategic Sourcing?

Strategic sourcing relates to the adoption of processes and practices to enhance overall supplier management to ensure that an organisation:

  • effectively manages its supply chain
  • spends its money wisely in order to get best possible value for money
  • lowers whole of life costing and reduces any risks associated with purchasing goods and services

Monash Supplier Arrrangement Structure

In the context of Monash University, we cannot set up strategic supply contracts with the majority of suppliers in our vendor database in SAP.  This is because the purchase of many goods and services are either on a one-off or occasional basis, usually for a single or specialised product.

Managing these suppliers is best handled at the cost centre/departmental level whereby the need is confined to that department and local expertise is applied to the sourcing of the products.

The application of good purchasing practice at this level should be applied to ensure:

  • department gets competitive quotations
  • seeks best value for money
  • applies good purchasing practices
  • ensures all negotiations and transactions are conducted in an honest and ethical manner

Aggregating the purchase of common use goods

In the case where the need for a good or service is across all areas of the University there is a definite advantage in aggregating purchases to a single or small group of suppliers.

The benefits of aggregation include:

  • improved management of suppliers at a strategic level
  • strengthens an organisations negotiating position
  • drives lower prices through improved order processing and settlement
  • can effectively lower transaction costs and support overall better supplier management

Using Strategic and Endorsed Suppliers

Monash Procurement has established a range of strategic supply contracts and Endorsed Supplier panels for many common-use goods and services.  In order to maximise the effectiveness of these strategic contracts it is expected that all cost centres use the Endorsed Suppliers where appropriate.  This will concentrate the spend and increase the potential to further leverage better prices and lower overall costs.

In addition to Endorsed Suppliers, the University will, from time to time, negotiate Strategic Supplier contracts.  These are normally reserved for the supply of special goods and services which cannot be devolved  to the cost centre level.  Examples of Strategic Supply contracts are - electricity, telecommunications carrier services, vehicle fleet purchases, building contractors etc.

Monash Framework for Supplier Arrangements

As part of the re-organisation of procurement at Monash University, and flowing from the first phase of the SpendWise initiative, the University has adopted the following framework for classification of suppliers and the required compliance covering the use of these suppliers.

Strategic Model

Role of the University's Procurement Board

In June 2007, the University set up a new governance structure by the establishment of the Procurement Board. The Procurement Board will be the primary body that will provide oversight and governance on which suppliers will established as Endorsed Suppliers.  The establishment of an Endorsed Supplier will normally result from the conducting of a formal tender / selection process. 

Terms of Reference for the Procurement Board.

The role of CIPSA in Australia

Many organisations, both in the public and private sector, are recognising the advantage of applying sound procurement practices and the growth of procurement professionals is one of the fastest growing professions.  The establishment of the Chartered Institute of Purchasing and Supply Australia (CIPSA), as a subsidiary of the UK-based CIPS, is the peak professional, procurement body in Australia and provides both training and support to procurement professionals.

CIPSA resource material on procurement best practise

CIPSA have a vast aray of resources on procurement best practice and some of their articles are listed below for reference.  Some of the articles have been drawn from the OGC (Office of Goverment Commerce UK).