Multisourcing

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Multisourcing is the concept of working with multiple suppliers who are also competitors. [1] Large-scale buyers, such as the U.S. federal government, may want to feel assured that there is more than one supplier for an item.

Contents

It has been described as the opposite of "one neck to wring". [2] The opposite is called sole-source.

Intel, a large corporation, was not "enough" for the x86, and so others such as Advanced Micro Devices and Cyrix were needed.

Models

There are two primary models for Multisourcing: Prime Contractor and Client models: [1]

Prime Contractor model

A Prime Contractor may use subcontractors . Either way, the client has "one neck to wring". [2]

Client model

The client is the system integrator . [3] Multiple outside sources, [4] each with their own "perceived core competencies", [1] provide services. This does not preclude the outside suppliers from further subcontracting. [1]

Sole sourcing

Although "no-bid contracts are illegal under European Union procurement law", [5] "there are exclusions and exceptions" in the UK's rules, [6] and "U.S. law permits .. sole source contracts under specified circumstances". [5] The US Government raised concerns in 2009 about "excessive reliance" on sole-source contracting and use of "contracts with a limited number of sources". [7]

The assurance that the identical and in some cases, certifiably equivalent,[ clarification needed ] item is available seems to defy a statement that "[t]here is no optimization achieved through working with a single provider", [8] especially when "sustainable" capabilities exist. [9] [5] [8]

Cost plus and other arrangements

Both the much-disputed Iraq reconstruction no-bid contracts and those awarded after Hurricane Katrina contained "cost-plus" provisions which "guarantee contractors a certain profit regardless of how much they ultimately spend", according to the Wall Street Journal . Critics claim that such agreements "remove any incentives for private companies to control expenses, which are paid for by the tax-payer". [10]

A no-bid contract is a military or government contract that is made directly with a corporation, bypassing the standard process of bidding. These contracts can be made much more quickly than a typical contract, however they are often fraught with suspicion. After the 2003 war in Iraq, the Halliburton company, previously headed by then vice-president Dick Cheney, was issued a $2 billion no-bid contract for fuel distribution. Speed is usually the rationale for such contracts.

Just days after Hurricane Katrina, in September, 2005, the Bush administration awarded no-bid reconstruction contracts to companies such as Fluor Corp., Bechtel, Shaw Group, CH2M Hill Cos, and Halliburton's Kellogg, Brown and Root. [11] [12]

History

Although it was recently defined, multisourcing has been practiced in the market since competitors started to produce alternatives to IBM’s datacenter products in the late 1980’s. [13] Firms like Gartner [14] and Forrester Research [15] pushed the term into the public eye.

Future

Multisourcing's strength, first recognized by Gartner Group in 2005, is to continue providing disciplined services via a blend from internal and external sources. [14]

In workshops, providers are taken through business scenarios to confirm details like method, data content and timescales for each cross-provider interaction. The outputs of these workshops are operational level agreements (OLAs) [16] which are signed and agreed upon by all providers to maximize performances and ensure that everyone is aware of the requirements of their job.

See also

Related Research Articles

Halliburton Company is an American multinational corporation responsible for most of the world's hydraulic fracturing operations. In 2009, it was the world's second largest oil field service company. It employs approximately 55,000 people through its hundreds of subsidiaries, affiliates, branches, brands, and divisions in more than 70 countries. The company, though incorporated in the United States, has dual headquarters located in Houston and in Dubai.

Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity which otherwise is or could be carried out internally, i.e. in-house, and sometimes involves transferring employees and assets from one firm to another. The term outsourcing, which came from the phrase outside resourcing, originated no later than 1981. The concept, which The Economist says has "made its presence felt since the time of the Second World War", often involves the contracting out of a business process, operational, and/or non-core functions, such as manufacturing, facility management, call center/call center support.

<span class="mw-page-title-main">KBR (company)</span> American engineering, procurement and construction company

KBR, Inc. is a U.S. based company operating in fields of science, technology and engineering. KBR works in various markets including aerospace, defense, industrial and intelligence. After Halliburton acquired Dresser Industries, KBR was created in 1998 when M.W. Kellogg merged with Halliburton's construction subsidiary, Brown & Root, to form Kellogg Brown & Root. In 2006, the company separated from Halliburton and completed an initial public offering on the New York Stock Exchange.

A request for proposal (RFP) is a document that solicits a proposal, often made through a bidding process, by an agency or company interested in procurement of a commodity, service, or valuable asset, to potential suppliers to submit business proposals.

Investment in post-2003 Iraq refers to international efforts to rebuild the infrastructure of Iraq since the Iraq War in 2003. Along with the economic reform of Iraq, international projects have been implemented to repair and upgrade Iraqi water and sewage treatment plants, electricity production, hospitals, schools, housing, and transportation systems. Much of the work has been funded by the Iraq Relief and Reconstruction Fund, and the Coalition Provisional Authority.

Procurement is the process of locating and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. The term may also refer to a contractual obligation to "procure", i.e. to "ensure" that something is done. When a government agency buys goods or services through this practice, it is referred to as government procurement or public procurement.

A performance bond, also known as a contract bond, is a surety bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor. The term is also used to denote a collateral deposit of good faith money, intended to secure a futures contract, commonly known as margin.

E-procurement is the business-to-business or business-to-consumer or business-to-government purchase and sale of supplies, work, and services through the Internet as well as other information and networking systems, such as electronic data interchange and enterprise resource planning.

Strategic sourcing is the process of developing channels of supply at the lowest total cost, not just the lowest purchase price. It expands upon traditional organisational purchasing activities to embrace all activities within the procurement cycle, from specification to receipt, payment for goods and services to sourcing production lines where the labor market would increase firms' ROI. Strategic sourcing processes aim for continuous improvement and re-evaluation of the purchasing activities of an organisation.

Eurest Support Services (ESS) is a subsidiary of the catering company Compass Group PLC specializing in harsh-environment large-scale food service and facilities management. Its primary clients are military forces and other security services, major defense contractors, and construction, mining, and oil exploration and production facilities worldwide.

Supplier diversity refers to the use of minority-owned businesses as suppliers, and a supplier diversity program is a proactive business program which encourages such use within an organisation's supply chain. Minority-owned includes black and minority ethnic business ownership, women owned, veteran owned, LGBT-owned, service disabled veteran owned, historically underutilized business, and Small Business Administration (SBA)-defined small business concerns. It is not directly correlated with supply chain diversification, although utilizing more vendors may enhance supply chain diversification. Supplier diversity programs recognize that sourcing products and services from previously under-used suppliers helps to sustain and progressively transform a company's supply chain, thus quantitatively reflecting the demographics of the community in which it operates by recording transactions with diverse suppliers.

<i>Iraq for Sale: The War Profiteers</i> 2006 American film

Iraq for Sale: The War Profiteers is a 2006 documentary film made by Robert Greenwald and Brave New Films. Produced while the Iraq War was in full swing, the film deals with the alleged war profiteering and negligence of private contractors and consultants who went to Iraq as part of the US war effort.

<span class="mw-page-title-main">Bidding</span> Method of competitive price determination used in auctions, stock exchanges, etc.

Bidding is an offer to set a price tag by an individual or business for a product or service or a demand that something be done. Bidding is used to determine the cost or value of something.

A vendor management system (VMS) is an Internet-enabled, often Web-based application that acts as a mechanism for business to manage and procure staffing services – temporary, and, in some cases, permanent placement services – as well as outside contract or contingent labor. Typical features of a VMS application include order distribution, consolidated billing and significant enhancements in reporting capability that outperforms manual systems and processes.

Outsourcing relationship management (ORM) is the business discipline widely adopted by companies and public institutions to manage one or more external service providers as part of an outsourcing strategy. ORM is a broadly used term that encompasses elements of organizational structure, management strategy and information technology infrastructure.

<span class="mw-page-title-main">Reverse auction</span>

A reverse auction is a type of auction in which the traditional roles of buyer and seller are reversed. Thus, there is one buyer and many potential sellers. In an ordinary auction also known as a forward auction, buyers compete to obtain goods or services by offering increasingly higher prices. In contrast, in a reverse auction, the sellers compete to obtain business from the buyer and prices will typically decrease as the sellers underbid each other.

<span class="mw-page-title-main">Invitation to tender</span> Business process

An invitation to tender is a formal, structured procedure for generating competing offers from different potential suppliers or contractors looking to obtain an award of business activity in works, supply, or service contracts, often from companies who have been previously assessed for suitability by means of a supplier questionnaire (SQ) or pre-qualification questionnaire (PQQ).

Performance based contracting (PBC), also known as performance-based logistics (PBL) or performance-based acquisition, is a product and services purchasing strategy used to achieve measurable supplier performance. A PBC approach focuses on developing strategic performance metrics and directly relating contracting payment to performance against these metrics. Common metrics include availability, reliability, maintainability, supportability and total cost of ownership. The primary means of accomplishing this are through incentivized, long-term contracts with specific and measurable levels of operational performance defined by the customer and agreed on by contracting parties. The incentivized performance measures aim to motivate the supplier to implement enhanced practices that offer improved performance and cost effective. This stands in contrast to the conventional transaction-based, or waterfall approach, where payment is related to completion of milestones and project deliverables. In PBC, since a part or the whole payment is tied to the performance of the provider and the purchaser does not get involved in the details of the process, it becomes crucial to define a clear set of requirements to the provider. Occasionally governments fail to define the requirements clearly. This leaves room for providers, either intentionally or unintentionally, to misinterpret the requirements, which creates a game like situation.

Service Integration and Management (SIAM) is an approach to managing multiple suppliers of services and integrating them to provide a single business-facing IT organization. It aims at seamlessly integrating interdependent services from various internal and external service providers into end-to-end services in order to meet business requirements.

JAGGAER, formerly SciQuest, is a provider of cloud-based business automation technology for Business Spend Management. Its headquarters is in Morrisville, North Carolina and it has offices around the world. The company's tagline is Procurement Simplified.

References

  1. 1 2 3 4 Nick Gill (2008). "The Keys to Successful Multisourcing" (PDF). Retrieved July 4, 2019.
  2. 1 2 Christopher Calnan (October 6, 2016). "Software maker Real Savvy raises new funds after pivoting, hitting profitability". BizJournals.com (Austin Business Journal). ... one neck to wring ... a single source of technology
  3. ↑ "Sourcing" (PDF). CrownCommercial.gov.uk.
  4. ↑ Sarah Burnett (May 2012). "Why the public sector is turning to multisourcing". computerweekly.com. Retrieved October 31, 2015.
  5. 1 2 3 "Sole Source" (PDF). Retrieved July 4, 2019.
  6. ↑ "Public tendering rules: UK decision to invoke Article 50" . Retrieved July 4, 2019.
  7. ↑ Office of the Press Secretary, Memorandum for the Heads of Executive Departments and Agencies. Subject: Government Contracting, published 4 March 2009, accessed 27 June 2023
  8. 1 2 Bobby Varanasi (September 2006). "Multisourcing - a comparative to outsourcing" (PDF). Retrieved July 4, 2019.
  9. ↑ 48 CFR Ch. 1, Part 6
  10. ↑ Thought pieces: who pays
  11. ↑ http://www.washingtonpost.com/ac2/wp-dyn/A55220-2003Aug27?language=printer [ dead link ]
  12. ↑ "Bush Cronies to Mop up Katrina". Wired.
  13. ↑ Louis V. Gerstner, Jr. Who Says Elephants Can't Dance? Inside IBM's Historic Turnaround. Collins (November 12, 2002). pp. 76
  14. 1 2 Linda Cohen; Allie Young (2006). Multisourcing: Moving Beyond Outsourcing to Achieve Growth and Agility. Gartner Inc. p. 236. ISBN   1591397979.
  15. ↑ Outsourcing Providers Need A Strategy Rethink To Address Buyers' Shift To Multisourcing
  16. ↑ Mansel Luke (September 17, 2013). "How to make multisourcing work". Information Age. Retrieved November 1, 2015.
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