Strategic Procurement; Linksys Company

Abstract

Many companies recognizes the value of strategic procurement in facilitating a profitable growth and how it has become a source of value. This paper seeks to evaluate the sourcing methods and supplier base taking Linksys Company as the case. The introduction part gives an overview of the paper’s content including the Company’s nature of operations and the objectives of the research. It also presents the significance of sourcing methods and the criteria that organizations use to select their appropriate sourcing methods. The second part comprise of the sourcing methods and supplier base that Linksys Company use in its procurement process. This part critically examines the sourcing methods and evaluates why the chosen sourcing methods for the company are suitable to it. The third part encompasses the proposal for strategic source framework which can facilitate excellence in procurement process and enhance value growth for the company’s customers.

Keywords: sourcing methods, procurement, value growth, and supply base.

Introduction

Leading companies take strategic procurement as a key factor in leading their profitable growth; hence, a source of value to their respective organizations. However, despite recognizing the profitability realized to the establishment of strategic procurement, various organizations apply different sourcing methods and supplier base. The main purpose of every one of them is to minimize linked costs and consequently raise the value of goods and services for their corresponding customers. Linksys Company is an example of organizations that strive to have an appropriate strategic source which can facilitate excellence in procurement and value growth. The current sourcing methods and the supplier base of this company are appropriate yet there is need to make further explorations to enable it achieve better results with respect to procurement and growing its value for the customers.

The sourcing methods and supplier base of Linksys Company

The sourcing methods and the supplier base of an organization depends on many factors such as their prospect customers, the nature of goods and services offered. Linksys Company is an American dealing with the data networking hardware products mostly for domestic use and small businesses (Li and Bernoff, 2011, p. 88). The products that Linksys Company particularly deals with include wired and wireless routers, Ethernet switches and other electronic devices. Therefore, it sourcing methods and the supplier base ought to suit these products, the distance that they are intended to cover and both prospect and potential customers.

Linksys Company believes in good supplier visibility, well-integrated systems, on-contract spending, and efficient sourcing processes. Every supplier wish to have such a strategy to ensure that it facilitates profitability and value for its customers. Furthermore, the company endeavors to tie up its valuable time and resources to make the entirety of its procurement process efficient. Therefore, the procurement department of this Company is responsible for sourcing the relevant goods and services to the Company for its business (Li and Bernoff, 2011, p. 89). There are six main sourcing methods used by Linksys Company which are appropriate for the nature of the business that it undertakes.

Open tendering sourcing method and procurement base

The Company used open tendering which involves competitive bidding. Lintukangas (2011, p.1) provides that open tendering offers an opportunity for the supplier companies to bid on goods in an open competition or in a free solicitation way. Linksys Company undertake the following actions in its tendering process (Lintukangas, 2011, p. 2): firstly, the company advertise locally; America for the interested companies to bid for goods and services. Secondly, the company has impartial and articulate technical stipulations. Thirdly, Linksys Company ensures that there is an objective evaluation techniques for the tendering process, and lastly, the company becomes open to all the bidders having qualifications.

The choice of open tendering sourcing method as one of the Linksys Company’s is based on the fact that it encourages effective competition for the suppliers willing to supply the goods to the company (Carlsson, 2015, p. 141). Therefore, the Company will end up emphasizing on the value for money which is the ultimate goal of choosing a given sourcing method. However, this is a procedure which requires much expertise with respect to procurement. According to Mols (2017, p. 89), this sourcing method is not suitable for large or complex suppliers because of a critical focus on the output process rather than the standards of procurement. Linksys Company does not deal with complex supplies; hence open tendering as a sourcing method and a procurement base may become suitable to it.

Open tendering involves some limitations which Linksys Company considered before making it one of its sourcing methods. Lintukangas (2011, p. 2) states that open tendering involves complex requirements which may not typically be appropriate for this method. The Company’s procurement department is suitable enough to handle all complexities involved in procurement; hence, this challenge is addressed right from the initial step of the procurement process. Also, the timeline for needing the goods in a Company may not be suitable with open tendering process as a sourcing method (Lintukangas, 2011, p. 3). However, the required goods in the company are procured long enough to gather for any uncertainties making open tendering a suitable sourcing method.

Two stage tendering sourcing method and procurement base

Another sourcing method used by Linksys Company is two stage tendering involving two procedures; each having two stage process. This method is only used by the Company when time is enough to secure a contract with the supplier. Sollish and Semanik (2011) considers this sourcing method and a procurement base appropriate for both sides since it allows both room for discussion to ensure that mutual needs are met. With this sourcing method, the procurement team gets a proposal for the goods to be supplied with two coverings (Sollish and Semanik, 2011, p. 154). One of them usually contains the proposal itself while the other one carries the financial information associated with the procurement process.

Once the bidder gets the information from the two coverings, then he will submit a technical proposal highlighting their solutions with respect to those sent by the procurement department. The later party then assesses whether their proposal is understood by the bidder and whether their solutions are worthy their requirement. Thereafter, the Linksys Company procurement department calls the highest scored proposal from many bidders for a discussion leading to an agreement on how and when to source the goods.

The subsequent procedure comprises of a bidder submitting a partial proposal instead of a complete one as in the initial procedure. This proposal usually contains the methodology and the technical specifications even though not in a full scope; hence, allowing room for more discussion leading to the most effective sourcing method (Sollish and Semanik, 2011, p.154). The later stage involve assessing the bidder with the highest qualifications who will then be invited to continue making a more thorough technical proposal which will be evaluated against the total cost to assess its feasibility to the Linksys Company’s budget. Finally, when the score for both technical and financial proposals are combined, then the bidder to be given contract is noted.

Single-source and procurement base

Linksys Company uses this sourcing method only on specific circumstances. According to Mols (2017, p.90), this sourcing method is a non-competitive one that is not suitable in all circumstances unlike other sourcing methods. This method usually occurs in case the procuring entity has an intention of acquiring goods and services from a sole contractor (Mols, 2017, p. 91). Linksys Company use this method mainly when it needs supplier of regular materials such as networking cables which have a specific supplier drawn from the initial assessment.

Despite of being rarely used, this sourcing method requires a strict approval process from the procurement manager prior to its usage. Linksys Company uses single source as its sourcing method in case of the following circumstances in the following circumstances apart from using it to acquire regular materials (The Strategic Procurement Practice Guide, 2017): firstly, the company uses it in case of emergencies resulting from insufficiency of materials while underway with the production process. Secondly, this method is used when there is only one qualified supplier for the goods currently required. Thirdly, Linksys Company use single source as a sourcing method when the benefits of using a given supplier are indisputably clear. Also, this method is used when certain products required by the company are only available from a given supplier. Lastly, the company use this method when the work is a continuation from a given supplier and cannot be continued by a different one.

At the end, the sourcing method chosen by the company is highly relative to the conditions, the effort of procurement and the nature of goods and services that the company requires. All of the above mentioned methods used by Linksys Company follow tight legal frameworks for the purpose of raising standards and quality in undertaking the selection framework.

Strategic source framework which can lead to procurement excellence and value growth.

Organizations strive to strategize their sourcing framework which can in turn lead to excellence in procurement and enhance value growth. This becomes the case despite having the current strategic approaches for sourcing and procurement. Strategic source framework established in every organization is dependent on factors such as the nature of products being sourced, the nature of operations undertaken by it, the availability of suppliers among others.

Linksys Company should consider changing some of the issues to match the dynamicity in operations and the market especially because the electronic goods such as networking cable are so dynamic. Jensen (2017, p 138) states in today’s competitive business climate, the supply chain expertise is dynamic to an extent that there is need to establish new means of reducing costs, assuring, and improving quality of the final product (Jensen, 2017, p.143). Strategic sourcing is among the method which can be used by the strategic managers in every organization to facilitate the achievement of the supply chain objectives. Therefore, Linksys Company should endeavor to act on the following actions to ensure excellence and value growth in its sourcing:

Identification of the suppliers

According to Christine, LeFave and Selig (2010, p.53), effectiveness in procurement management is based on consistent location of the best quality materials at the lowest probable price sourced from reliable suppliers. When identifying the new suppliers or the alternative ones, it is important to consider the logistic records for the company; hence, determine why one trade partner is more beneficial than another in certain times of the year (Christine, LeFave and Selig, 2010, p.53). When this is done, the company will ensure that it get smooth supply of products throughout the year making the operations smooth regardless of the external conditions.

Also, the competitive differentiation chance that a supplier has should be considered by the Linksys Company procurement department when identifying an alternative sourcing strategy. For example, the company can choose to use a specific supplier having a good brand image with its consumers (Christine, LeFave and Selig, 2010, p.54). This case creates an excellent sourcing methods and improve the value of the company as well as improving its image on the consumers. Furthermore, using this sourcing technique potentially leads both potential and prospect consumers to prefer the Linksys Company’s products over the others.

One example in which Linksys Company can employ the sourcing strategy of a specific supplier is including its logo on the company’s personal products such as electronics and the networking cables which the company deals with. According to Christine, LeFave and Selig (2010, p.55), employing the strategic sourcing techniques in identifying the best supplier in this dynamic global marketplace aids in maintaining efficiency and effectiveness in supply chains across all the organization’s divisions or partners. The ultimate goal of using this method is to ensure consistency in supply of materials which will in turn ensure smooth operations throughout the year.

Cultivation of the relationships with the suppliers

It is important to identify the suppliers. However, this action does not imply that strategic sourcing is done entirely on just identification of suppliers. Once the supplier has been identified and assessed to be qualified in terms of reliability and cost effectiveness, the Linksys Company should then seek how to create a long-term relationship with it. One of the ways of doing this is working closely with them to provide a lot of win-win scenarios which will strengthen the relationship.

Christine, LeFave and Selig (2010, p.55) provides that developing a strong relationship with the suppliers can help in getting professionals at a cheap cost, and enhancing strive to have market and quality objectives.  These achievements will happen while the supplier is also given chance to improve efficiency in delivering materials to the company as per the specifications. Furthermore, this is an era where consumers are aware of the ethical practices that the organization ought to have (Rusch, 2017, p.68). Linksys Company should therefore build a relationship with the suppliers that will ensure that all the legal provisions and the ethical business practices are adhered to during supply.

The consumer friendly suppliers have a good image on the suppliers. Hence, creating a long-term relationship with them makes the company realize more customers who will consequently improve the profit, make the strategic sourcing excellent, and improve the value growth in the long run (Rusch, 2017, p.9). Also, with good relationship with such suppliers, Linksys Company will be able to improve its opportunities for the company to improve its products and image through an establishment of PR and marketing communication with its prospect and potential customers.

Continuous improvement of procurement skills

The essence of changing the strategic sourcing is to improve the company’s growth. Therefore, the procurement professionals of Linksys Company together with their manager should expand their knowledge by undertaking various courses available. Their objective should be to maximize their strategic sourcing skills which are usually provided by the industry leaders who have experience on the strategic sourcing having taken part for a long time in the procurement sector.

According to Rusch (2017, p.69), strategic sourcing is a field with continuous improvement. Therefore, for one to become proficient in this field, he is required to keep his sourcing knowledge up-to-date. This will help them understand, plan, and implement a viable strategic sourcing and also reinforce the efficiency in supply chain management. The ultimate outcome of such action is creation of opportunities for Linksys Company to improve its corporate image and cut down the overall cost of production (Rusch, 2017, p.69). The company will also improve the market share by being ranked top in competition.

Therefore, the Linksys Company procurement professionals and their managers should strive to always improve their skills to suit the dynamicity in the global market. The aim of being contented with the procurement knowledge is for them to devise appropriate strategic sourcing methods that will suit both Linksys Company’s needs and the consumer needs.

Understanding and embracing the possibilities

Linksys Company should seek to understand and embrace the possibilities. According to Christine, LeFave and Selig (2010, p.54), wide variety of skills are required for one to undertake strategic sourcing implementation. Therefore, the procurement department of the company should acquire some of the competencies including the following:

Firstly, the procurement professionals of Linksys Company should be able to describe, recognize, and access key issues, opportunities, approaches, and principles that the company pursue in its endeavor to achieve a competitive advantage (Procurement excellence, 2011). With these competencies, the company will be able to evaluate an appropriate sourcing; hence, make the sourcing strategy excellent and increase the value of growth in the company. Opportunities comes once implying that the procurement professionals ought to be vigilant not to lose any of them coming. The difference posed by various sources of goods and materials may make one of them worthy over the others (Procurement excellence, 2011). Reliability and quality of goods sourced is of essence to the company. For this reason, the procurement experts in Linksys Company should maintain a given principle in identifying a sourcing strategy aiming at excelling in sourcing field and improving the value growth.

Secondly, Linksys Company procurement officers should develop competencies in identifying both internal and external challenges that pose effect in sourcing strategy. Challenges in sourcing strategy is inevitable especially in an organization such as Linksys whose products are dynamic. Therefore, with knowledge in both internal and external sourcing environment, the procurement professionals in the organization will be able to overcome such challenges making it possible to improve its sourcing strategic means and increase the value growth.

Defining and describing matters involved in global sourcing, technological procurement, and procurement ethics is essential in improving the sourcing strategy in an organization and consequently improving the value of growth. These competencies will enable the procurement department of Linksys Company to strategize on the starting point, the progress in procurement all the way to the actual sourcing. Furthermore, the relevant experts should be able to identify and apply decision making approaches and problem-solving techniques in determining the best course of action concerning the sourcing strategy the company.

Conclusion

Strategic procurement as a key factor in leading their profitable growth; hence, a source of value to Linksys Company. This research shows that sourcing methods and the supplier base of an organization depends on many factors such as their prospect customers, the nature of goods and services offered. Some of the sourcing methods and procurement base used by Linksys Company include open tendering sourcing method and procurement base, two stage tendering sourcing method and procurement base, and single-source and procurement base. The strategic framework and techniques which can lead to procurement excellence and value growth including understanding and embracing the possibilities and Continuous improvement of procurement skills have also been explored.

References

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