1. Strategic Sourcing Thomas W. Essig
GOOD AFTERNOON EVERYONE! THIS MORNING I MENTIONED THAT I’D BE DISCUSSING SOME CHANGES NOW BEING IMPLEMENTED IN THE WAY WE SOURCE COMMON SUPPLIES AND SERVICES.
THESE CHANGES ARE LIKELY TO MOVE US FROM THE “TACTICAL LEVEL”, WHERE SOURCING DECISIONS ARE MADE BY THE INDIVIDUAL CONTRACTING OR PROGRAM ACTIVITY, TO THE “STRATEGIC LEVEL”, WHERE THOSE DECISIONS ARE MADE MADE AT SOME HIGHER LEVEL WITHIN THE DEPARTMENT, INCLUDING SOME AT THE ENTERPRISE, OR DOD-WIDE LEVEL.
Thomas W. Essig
Director, Program Analysis and Business Transformation
DASN Acquisition Management
April 25, 2006

2. What is Strategic Sourcing?
Some of you may have seen OMB’s 20 May 05 memo on “Implementing Strategic Sourcing”.
DEFINED BY
STRATEGIC SOURCING DEFINITIONS
Office of Management and Budget (OMB)
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. This process helps agencies optimize performance, minimize price, increase achievement of socio-economic acquisition goals, evaluate total life cycle management costs, improve vendor access to business opportunities, and otherwise increase the value of each dollar spent.
Public Sector Strategic Sourcing Roundtable
Strategic sourcing is NOT….an answer…it is NOT leveraged buying, it is NOT bundling.
Strategic sourcing IS…
A PROCESS for systematically analyzing and developing optimal strategies for buying goods and services.
DATA DRIVEN – fact-based analysis to drive decision making rather than just “hunches”
HOLISTIC process that addresses customer needs, market conditions, organizational goals and objectives, and other environmental factors
Based on MARKET INTELLIGENCE and takes into account small business capabilities
Inclusive of CUSTOMER REQUIREMENTS
A CROSS-FUNCTIONAL APPROACH
About SUPPORTING AN ORGANIZATION’S MISSION through procured goods and services
About DEVELOPING ORGANIZATION WIDE STRATEGIES

3. DoD-Wide Strategic Sourcing (DWSS) Program
To accomplish this, we’ve initiated the DoD-Wide Strategic Sourcing program (DWSS). It’s objectives are ID’d on the right side of this chart.
DoD-Wide Strategic Sourcing (DWSS) Program
Vision
Program Objectives
Reduction in Total Cost of Ownership
Department-wide cross-functional acquisition strategies
Improvements in meeting socio-economic goals
Standardization of acquisition business process
Improved skills of DoD acquisition community
To provide customers throughout the Department [of Defense with services acquired] in the most efficient and advantageous manner.
Memorandum from Paul Wolfowitz, Deputy Secretary of Defense, “Acquisition of Services Review” 2/6/2003
Achieving DWSS objectives will require collaboration among the various DoD organizational components and senior level “buy in”

4. Temporary Service Cost Drivers
KELLY AND MANPOWER, AMONG THE LARGEST PLAYERS IN THE US MARKET, …
… EXHIBIT A BREAK-EVEN MARK-UP OF APPROXIMATELY 20%, SUBSTANTIALLY LOWER THAN THE INDUSTRY AVERAGE
CONTRACT LABOR SERVICES
US REVENUE SHARE
(MAY 2004)
COMPARISON OF BREAK-EVEN MARK-UPS
INDUSTRY AVERAGE VS LARGEST US PLAYERS
(2004)
LARGE PLAYERS EXHIBIT A SUBSTANTIALLY MORE EFFICIENT COST STRUCTURE COMPARED TO INDUSTRY AVERAGE
TOTAL # SERVICE PROVIDERS = > 20,000
Source: IBIS, Temporary Help Services in the US, May 2004
Source: CSFB, Global Services, March 2004; CIBC, Manpower Equity Research, April 2004, Censeo analysis
Do our incumbents have favorable cost structure to meet our requirements with high levels of service at comparably lower prices/ mark-ups?

5. The Acquisition Strategy creates a collaborative method of interacting with small business suppliers while maintaining competition
Place Competitive Orders
RFI to understand cost drivers
RFP for Initial Multiple Award Task Order Contracts
Exercise Options with Final Group of Suppliers
Conduct Supplier Development Workshops
Conduct competitive RFx to down select to initial supply group comprised of incumbent and new small businesses
Further consolidate spend to “preferred suppliers” and implement policy enforcements
OVERALL OBJECTIVE(S)
Work collaboratively with suppliers to drive down costs of working together
Achieves/exceeds socio-economic goals
Includes a combination of set-asides for 8(a), Hub-Zone, and Service Disabled Veteran Owned
Enables fair market prices for DoD
Creates a collaborative approach to working with supply community – enhances capabilities of small businesses