http://www.nasbc.org/Strategic_Sourcing

Headquarters U.S. Air Force Integrity - Service - Excellence

STRATEGIC SOURCING

Teresa Rendon Mr. Ronald Poussard Small Business Programs Director, Small Business Programs SAF/SB SAF/SB February 26,2009

Federal Mandate from OMB May 2005 May 05 Memorandum from the Office of Management and Budget (OMB): 

Each agency’s Chief Acquisition Officer (CAO), Chief Financial Officer (CFO) and Chief Information Officer (CIO) are responsible for the overall development and implementation of the agency strategic sourcing effort.

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Beginning in January 2006, the CAO shall report annually to the Office of Federal Procurement Policy (OFPP) regarding, at a minimum, reductions in the prices of goods and services, reductions in the cost of doing business, improvements in performance and changes in achievement of socio-economic acquisition goals.

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Strategic Sourcing Definition Strategic Sourcing is the 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.

OMB Memorandum Re: Implementing Strategic Sourcing 20 May 2005

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What is Strategic Sourcing?

The “IS” & “IS NOTS” Strategic Sourcing IS NOT Just…

Strategic Sourcing IS…

Leveraged buying

A PROCESS for systematically analyzing and developing optimal strategies for buying goods and services ••

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Contract consolidation/bundling

DATA DRIVEN – fact-based analysis to drive decision making rather than just “hunches”

A HOLISTIC process that addresses customer needs, market conditions, socio-economic considerations, organizational goals/objectives & other environmental factors

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About saving money ••

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The resulting contract

Contracting and procurement

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Based on MARKET INTELLIGENCE and takes into account small business capabilities ••

A COLLABORATIVE, CROSS-FUNCTIONAL approach

About SUPPORTING AN ORGANIZATION’S MISSION through procured goods and services ••

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4

Benefits of Strategic Sourcing: Beyond Consolidation and Leverage Primary Benefits of Strategic Sourcing

Change in Consumption/ Volume

Reduction in Cost Per Unit Pricing Improvements • Lower unit price • Volume rebates • Payment term discounts Supply Chain Savings • Cost of capital • Warehousing costs • Shipping costs

Demand Management • Eliminate demand • Reduce consumption • Encourage substitution • Change product mix Specification Review • Eliminate “gold-plating” • Simplify specifications • Alternative products

Reduced Lifecycle Costs • Maintenance costs • Operating costs • Disposition costs

Improved Operating Efficiency Reduced ProcurementRelated Operating Expense • PO Processing • Accounts Payable • Receipt/Warehousing • Standardized procurement process

Improved Focus on Socioeconomic Goals Socio-economic Goals • Structured analysis of small/disadvantaged business opportunities

• Reduced Non-Procurement Related Operating Expense • Other operating efficiencies Performance Monitoring • Structured metrics and periodic review of contractor performance

Censeo Consulting Group, Inc. - Confidential; All rights reserved, 2005

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Source: Censeo Consulting Group

How it all started 

71 contracting offices and numerous Field Operating Agencies (FOAs) are doing great work: •

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But, as organized, are only able to provide tactical support to their customers

This alignment results in: •

Redundant procurement of similar goods and services 

Sometimes from the same vendors

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Inability to effectively strategically source requirements

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Inefficient use of contracting expertise

Business As Usual Can Not Continue…

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How will it apply? 

Only applies to base-level (installation) contracting within the continental United States 

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Approximately $15 Billion per year

Does not apply to: 

Major Weapon Systems

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Logistics Support to Weapon Systems

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Laboratory Support

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Research, Development, Test and Evaluation

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Regional Approach Original

AFMC Centralized Strategic Sourcing Responsibility and Execution

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Buying largely by 5 geographic-based Air Force Materiel Command (AFMC) Regional Centers Workload based on region-- not Major Command (MAJCOM) spend

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Risk Mitigation Strategy Revised Approach AFMC-aligned, AF-wide SS Organization

Joint AFMC & MAJCOM Strategic Sourcing Responsibility and Execution

MAJCOM Strategic Sourcing “AETC Example”

• Stand up AFMC-aligned Organization-- Execute AF-wide Strategic Sourcing • Manage enterprise Field Operating Agencies (FOAs) & Commodity Councils • No geographic regions-- retain MAJCOM alignment • MAJCOMs establish strategic sourcing capability • Retain Headquarter Specialized & local buying missions Integrity - Service - Excellence

AETC Strategic Sourcing Vision ď Ž

The goals and objectives of the Air Education and Training Command Contracting (AETC CONS) Strategic Sourcing flight continue to evolve as the command leads the way in transforming USAF acquisition towards a culture of strategic sourcing. The standing mission statement of the AETC CONS Strategic Sourcing Flight is provided below:

Leading USAF acquisition transformation by teaming with functional partners and leveraging Strategic Sourcing principles to develop optimized sourcing strategies, reduce Total Cost of Ownership, and utilize Small Businesses to the maximum extent practicable

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Strategic Sourcing Way Ahead An Example 1

Printer Paper Acquisition Example Review Review Current Current Strategy Strategy

Execute Execute Strategy Strategy

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Market Market Research Research

Performance Performance Management Management

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Strategic Strategic Sourcing Sourcing Team Team Requirement Requirement Definition Definition

Sourcing Sourcing Strategy Strategy

Paper is currently purchased “tactically” from unit-to-unit Cannot achieve volume discount with tactical purchases Prices vary Most purchases to Large Businesses

Market Research

What types of paper are available? (recycled, etc) What are the cost drivers?

Do we have leveraging capability?

Can we purchase through a Small Business?

What are trends in this industry?

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Requirement Definition

• Demand is high due to employee pilferage of paper reams • Small Business can meet requirement • Determine the type of paper needed

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Sourcing Strategy

Purchase paper in boxes (not reams) – reduces demand Purchase environmentally compliant product Purchase in bulk – can negotiate considerable discount Purchase from Small Business

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Entire process can be executed quickly

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Review Strategy

Why Strategic Sourcing?

Brings Greater Opportunities for Small Business • We know small business capabilities are often not fully understood • We know strategic sourcing analyses will help “grow the pie” in terms of opportunities currently available for small businesses:  Via better capture of “spend” for various goods and services  Inclusion of Small Business Specialists on Strategic Sourcing Teams early in the process  Through enhanced market analysis to determine capability, risk and past performance  By deploying comprehensive data analysis to enable datadriven strategic sourcing decisions We Weaim aimto tomaintain maintainand andstrengthen strengthenSmall SmallBusiness Businessthrough throughStrategic Strategic Sourcing…

Sourcing…

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Actions You Can Take Remain Competitive for Strategically Sourced Contracts 

Keep your local AF Small Business Specialist apprised of your capabilities, interests and areas of possible competitive advantage

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Keep your Central Contract Register data current

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Market research tool for contracting officers

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Provides information about business size and socio economic status

Subscribe to FEDBIZOPS and stay current on posted opportunities •

Respond to Sources Sought Synopses and Request for Information

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Participate in Industry Days and small business outreach events

Consider leveraging your capabilities by “teaming” with other small businesses to pursue larger procurement opportunities There are many resources available to help you!

-- Local Air Force Small Business Specialist (SBS)

-- www.AFSmallBiz.org (Locator Link for SBS info)

-- Small Business Administration; www.SBA.gov

-- Small Bus Development Centers; www.sbdc.org

-- Minority Business Development Agency (MBDA)

-- Procurement Tech Asst Centers; www.PTAC.org

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QUESTIONS?

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