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Partnership Sourcing
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Partnership Sourcing – Alpha Products There are many different types of sourcing that can be looked at when trying to buy a product or service from suppliers. However when an organisation is looking for a long-term involvement with one specific supplier a partnership is often looked to as being a step in the right direction. A partnership can be defined as “A commitment by customers/suppliers, regardless of size, to a long-term relationship based on clear mutually agreed objectives to strive for world-class capability and competitiveness” Partnership Sourcing Limited (1992) In the case, Alpha Products are looking to set up a partnership with a local company, called O’Connors, to carry out all on-site engineering and maintenance. This report will look at the advantages to both sides of this action and any potential problems or risks. One of Alpha’s main problems is that they are currently using too many contractors, with a high amount of spend and rising problems with safety and accountability. A partnership with O’Connors would look to solve these problems with the two companies working together. The partnership would look to drive down the cost of ordering, allowing Alpha to make more profit and in turn re-invest in their out-of-date machinery. They are currently processing around 3,000 orders a year, and at £60 an order this is a massive strain on their budget. A partnership would allow them to reduce this significantly, possibly allowing them to place monthly or weekly orders and invoices. An idea like this would also make the purchasing process less clerical. This is key if the company wants their Purchasing department to add value to the business, as it would allow them to spend more time on strategic sourcing etc and less time on invoices and order processing. If all of this came into place, it is likely that the company would look at moving some of the 5 buyers that are dealing with all the contractors into different areas, either to working in different functions looking at the purchasing or simply getting rid of them to reduce labour costs. With the large amount of orders that are currently being placed across a wide range of suppliers, Ruth Turner has already identified that Alpha are not optimising their bargaining power. Working within a partnership however should allow them to do this more effectively, as instead of putting their £2 million a year across 50 contractors, it would just be given to one single supplier. This should mean that Alpha would be able to use more leverage buying, and together they and O’Connors would be able to agree lower prices and reduce the total cost of the operation. This action would also hopefully bring any economies of scale that Alpha may be able to achieve to light, also allowing them to drop the cost of this high spend operation. There are currently problems with the safety and accountability of the contractors that are on site at Alpha, due to the high amount of different people any accidents or incidents are becoming increasing difficult to report and look into. Setting up a partnership with O’Connors would mean that this problem would be virtually eradicated. It would enable them to set up procedures and reports and put them in place, knowing that only O’Connors would be on site. They would probably have a key point of contact to deal with safety issues and would know at any time who exactly was on site. A step further from this would be the possibility of setting up a Total Quality Management (TQM) group with O’Connors involved. This would not only look at the safety issues on site, but also able Alpha to look at improving the processes that are in place in the plants, improving quality and standards right across the plant.
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