More Sole Source Procurement Solutions

PurchTips - Edition # 216 November 2, 2010

By Charles Dominick, SPSM

How Do You Change A Sole Source Situation?

Sole source situations - where there is only one capable supplier available - are arguably the most challenging circumstances that procurement professionals have to deal with. With no threat of competition, sole source suppliers are often inflexible in terms of keeping prices reasonable, agreeing to performance guarantees, or cooperating with other procurement initiatives. Here are three ideas for dealing with sole source situations…

1. Help top management hate sole source situations as much as you do. Top management needs to view sole source situations not just as nuisances to you, but as serious organizational problems. Educate them through examples of problems caused and by creating, charting, and sharing two cost indexes: one that tracks cost changes in your highest spend sole source items and a second one that tracks cost changes in your highest spend non-sole source items. If management sees evidence that costs increase much more sharply for sole source items, they will help you accomplish ideas 2 & 3 below. For more details on creating these cost indexes, see my blog at http://tinyurl.com/29kjyd5.
2. Eliminate the cause. Many sole source situations arise because a product was designed around one supplier's unique capabilities. A redesign that eliminates reliance on a sole source could be the cure. This is a resource-intensive initiative, so the benefit has to outweigh the cost.
3. Codify a requirement for early procurement involvement. Once top management is on your side, push for them to authorize an organizational policy requiring that the procurement department be involved in product design before the supply base is engaged or suppliers are decided upon to prevent future sole source situations.

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