TRANSITIONING TO SUPPLY CHAIN MANAGEMENT: AN ENTERPRISE FOCUS

1. TRANSITIONING TO SUPPLY CHAIN MANAGEMENT: AN ENTERPRISE FOCUS A presentation by: Stephen B. Gordon, PhD, FNIGP, CPPO Director, Graduate Certificate Program in Public Procurement and Contract Management Old Dominion University November 14, 2011 sbgordon@odu.edu

2. Purpose of this presentation Point to the opportunity for public procurement to: Positively affect how government operates Change how others view the function Get a seat at the table Gain recognition as a profession

3. The historical view of the public procurement function A necessary evil An impediment Focused on process; not results Tactical; not strategic Reactive A job anyone can do

4. How can public procurement change its image and standing? By contributing to the achievement of enterprise goals, such as: • Cost savings – long and short-term • Quality operation and service delivery • Efficiencies • Satisfied Stakeholders • Policy implementation

5. The time is right Budgets Economic conditions American global position Confidence in government The Wall Street Journal, November 12, 2011

6. The implementation of public policy through public procurement • Improvement of working conditions • Job creation • Civil rights • Employee rights • Development of businesses in targeted demographic categories • Protection of businesses within jurisdictional boundaries • Energy conservation • Privatization • Sustainability

7. Procurement is a sub-system of an enterprise system • Outputs the sub-system must produce • Outputs the sub-system can and should produce • Often-conflicting demands (inputs) and pressures: • Client needs and requirements • Legal authority, requirements, and constraints • Politics and politics • Budgets and budgets • Consequences if the procurement sub-system does not produce • The outputs it must produce • The outputs it can and shouldproduce

8. How can we adapt the traditional public procurement sub-system to meet contemporary demands? Recognize the need to adapt Figure out where adaptations need to occur Look at the available options Evaluate those options Apply the options that fit

9. Supply chain management (SCM) should be one of the options considered In the private sector, SCM has: • Proven itself to be a “strategic weapon” (Dobler and Burt, 1996) • Led to: • Recognition for purchasing and supply management as a “function co-equal in corporate importance with design, conversion, marketing, and finance”. • Compensation of procurement professionals on a par with other professionals in leading edge organizations”. (Ibid.)

10. What is supply chain management? Those actions and values responsible for continuous improvement of the design, development, and management process of an organization’s supply system, with the objective of improving its profitability and survival of its customers and suppliers. . . (Burt, Dobler, Starling, 2003, as cited in the NIGP Online Dictionary) 2. The identification, acquisition, access, positioning and management of resources the organization needs in the attainment of its strategic objective. Also see Materials Management. (ISM, 2005, as cited in the NIGP Online Dictionary)

11. Elements in a supply chain that should receive attention Elements affecting: • Quality • Total Cost • Timeliness • Continuity of supply • Stakeholder satisfaction • Strategic goal fulfillment • Policy implementation to

12. Historical public procurement versus supply chain management

13. Why has SCM not been widely adopted in the U.S. Public Sector? Your answer 1 Your answer 2 Your answer 3 Your answer 4 Your answer 5

14. Working example: achieving a public entity’s strategic goal of sustainability • Can procurement contribute to the achievement of such a goal? • How critical is procurement’s role? • What steps can and should procurement take? Sustainability aims to meet environmental, economic and social requirements in order to encourage behavior that supports the needs of present and future generations.

15. What is sustainability? • It about more than “being green” • The “Triple Baseline” • Environmental Protection & Resource Conservation • Social Well-Being & Equity • Economic Prosperity and Continuity • Definition of “sustainable: 1: capable of being sustained 2 a: of, relating to, or being a method of harvesting or using a resource so that the resource is not depleted or permanently damaged <sustainable techniques> <sustainable agriculture> http://www.merriam-webster.com/dictionary/sustainable?show=0&t=1321217650

16. Sustainability can be sought at every step in the supply chain • Extraction, processing, packaging, and transportation of raw materials • Disposal and beneficial re-use of unused raw materials and by-products • Manufacturing, transportation, operation, maintenance, and disposal of production equipment • Manufacturing/production, packaging, shipment/delivery of the “final product” • The useful life span of the final product • Disposal and beneficial re-use of unused raw materials and by-products. • Disposal and beneficial re-use of unused raw materials and by-products. CAVEAT: Fulfillment of the minimum requirements for performance, reliability, maintainability, etc. of the good, service, or construction work cannot be sacrificed for the sake of sustainability.

17. Where in the supply chain could a public procurement agency, using SCM, seek sustainability for these products? How?

18. Why should public procurement officials use SCM to achieve sustainability? A way to: • Support achievement of a strategic goal • Make a positive difference for the public • Reduce cost and save money • Justify buying higher quality • Improve the function’s image and standing

19. Something you may find interesting . . . http://www.youtube.com/watch?v=_JdOH7GrE6Q

20. But wait . . . . . . How do I “sell” sustainable procurement? . . . How do I integrate SCM into my tactical plan? . . . How do I successfully execute my tactical plan? . . . What can cause me to be less successful than intended? . . . What do I do after each contract has run its course? . . . How do I sustain sustainable procurement?

21. Available resources, methods, and other aids for implementing sustainable procurement through SCM • A body of experience and analysis, from mostly outside the U.S. • A relatively small number of entities in the U.S. public sector • International organizations such as the UN and the OECD • The Responsible Purchasing Network • The Sustainable Procurement Initiative • Research done by CAPS, NIGP, and Old Dominion University • Such proven methods as: • Value Analysis • Life Cycle Costing • Performance Based Contracting

22. Closing Comments _____________________________________________ Final Round of Q&A __________________________________________________________________ Thank you for your attention!