Strategic Sourcing … Helping Analyze an Organization’s Spending

In mid-2005, the Office of Management and Budget (OMB) released a memorandum, which defined Strategic Sourcing as a collaborative and structured process of critically analyzing an organization’s spending, and using this information to make business decisions about acquiring commodities and services more effectively and efficiently. 

 Additionally, OMB directed all agencies to define commodities in order to “leverage spending to the maximum extent possible through strategic sourcing.”

 The Navy Strategic Sourcing Division, located within the Naval Supply Systems Command Fleet Logistics Center (NAVSUP FLC) Norfolk, has taken that direction and run with it.  Since 2005, they effectively completed a number of highly visible, highly complex Strategic Sourcing efforts that yielded great benefits and savings.  Their objective is to specifically identify opportunities for making better procurement decisions across the DoN creating the following:

 • Reductions in cost per unit

• Changes in consumption/volume

• Improved operating efficiencies

• Improved supply management 

 Much like the steps of Operation Risk Management (ORM), Strategic Sourcing can be cyclical.  The process does not end with the last step.  Within the Strategic Sourcing Process, FLC Norfolk attempts to leverage the government’s power by first collecting data on the commodities – Who supplies them?  Who uses them?  What are the major services provided?  Where are the services needed?  This data comes by surveying both customers and industry leaders.  Additionally, once a solution is implemented, FLC Norfolk monitors the solution through different databases as well as vendor’s submitted reports.  This data is collated and used in the next spiral for the commodity.

 After collecting the initial data, the Strategic Sourcing team strives to find the best fit for each of the individual commodities.  Following the implementation of any Strategic Sourcing solution, the team continues to monitor the contract, track metrics, performance and ensure the Navy is getting the best possible value through the duration of the solution.  And, in the next iteration, when more data is collected, the Strategic Sourcing team can adjust their strategy to include for efficiencies and greater savings. 

 To date, the commodities that FLC Norfolk has defined and manage include …

 * Integrated Logistics Services

* Navy Furniture Program

* Reverse Auction Program

* Maritime Coatings

* Clerical Services

* Fleet Readiness Enterprise

* Standard Program Management

 The FLC Norfolk Strategic Sourcing Team’s work on Maritime Coatings alone won them the 2009 DoN Acquisition Excellence Award for Team Innovation, and resulted in a cumulative savings of more than $1.7 million per year.  Additionally, recent significant savings of more than $54.7 million has been achieved in the following programs …

 * Standard Program Management commodity ($9.7 million)

* Integrated Logistics Services commodity ($26.7 million)

* Reverse Auction Program ($8.9 million)

* Navy Furniture Program ($9.7 million)

 In the beginning of fiscal year 2013, the FLC Norfolk Strategic Sourcing team stood up two new commodity teams; Engineering Services and Conference Services.  These projects have both picked up a lot of momentum, and are moving smoothly through the Strategic Sourcing Process. 

 The goals of the Engineering Services Commodity Team are to reduce the total cost of acquiring engineering services, maintain the current level of service quality, and reduce the time needed to contract for requirements.  The scope of the team is to determine strategic sourcing solutions within $200 million of NAVSUP-contracted engineering services contracts.  The team involves key stakeholders within Fleet Forces Command, Commander U.S. Pacific Fleet, NAVSUP HQ, Fleet Logistics Center Norfolk (FLCN) and San Diego (FLCSD) contracting.  The team is co-led by representatives of the Deputy Assistant Secretary of the Navy for Acquisition & Procurement (DASN (AP)) and the FLCN Strategic Sourcing Program Office.

 The Conferences Commodity Team has been working with DoN Administrative Affairs (DoNAA) on a DoN wide strategic sourcing initiative for Conferences.  The team’s goal is to increase visibility and reduce the total cost of acquiring Conference Services; by promoting efficiencies and eliminating excess conference spending as part of the effort to promote efficient use of federal funds.  In support of our objective, the Strategic Sourcing Commodity Team has determined the scope for this initiative will focus on the service of conference planning, including the cost for planning services, criteria, and logistics required to plan a conference.

 Recently, our original purpose of evaluating the most appropriate means of supporting the Navy in this endeavor became a DoD initiative.  The Conferences Commodity Team has taken the reins and volunteered to be the lead for a DoD-wide Conferences initiative.  Members from the Air Force, Army, and DLA have joined our team, and we are working together to identify best practices and develop mutually beneficial solutions for conferences to be implemented across DoD. 

 It is expected that recommended solutions will be ready by June 2013.

 

By Lt. Cmdr. Eric Dieges, SC, USN, Contract Specialist

Fleet Logistics Command Norfolk, Va.