Selecting a Firm for Sourcing Exercise

Introduction

Selecting a firm for sourcing exercise is a very important process because of the need for the reliability of the company chosen to supply given products. According to Benny (410), before recommending a firm to be the primary supplier of a given range of products, it is always necessary to analyse its capacity to meet the expectations of the sourcing firm. This is not only done through critical analysis of the financial position of a firm, but also other factors that may directly impact its ability to operate normally.

Facilities Management Service needs a reliable company to supply it with the products it needs. This organisation whose financials have been analysed in the section above is one of the potential companies that may be awarded the contract of delivering various products to Facilities Management Service. However, a number of factors still have to be considered before this firm can be recommended as the most appropriate supplier. It is important to note that other than the financial analysis, further evaluation of the organisation will be necessary to determine its core competencies and other important factors that are directly related to areas in which Facilities Management Services is interested. In this section, the researcher will provide a justified recommendation as to whether this organisation would be considered for a sourcing exercise.

Discussion

When selecting a firm for sourcing exercise, the primary aim is always to eliminate the vulnerability of a firm as much as possible and to maximise the potential buying power (Coates 61). To maximise the buying power and eliminate or reduce the vulnerability of Facilities Management Services, it will be necessary to use a number of models that will help in justifying the final decision that will be made. The models will help in giving a clear justification of whether or not the organisation should be chosen based on the information that is provided about it.

Kraljic Matrix

One of the models that will help in determining whether the organisation is appropriate for sourcing exercise is the Kraljic Matrix shown in the figure below.

According to Anand and Goyal, the primary aim of Kraljic Matrix is to maximise a firm’s potential buying power and to eliminate or significantly reduce the supply vulnerability (440). It helps a firm to develop an effective purchasing strategy for organisation’s products and services. As shown in the figure above, this matrix has four quadrants, each having specific characteristics.

• Strategic items
  The items in the first quadrant have large financial impacts on the sourcing organisation. The firm sourced to deliver products and services falling under this quadrant should be reputable companies which may not disappoint the Facilities Management Services in any way. Most of the items in this quadrant are scarce but of very high value to the firm supplied by one or a few companies. The organisation whose financials have been analysed in the section above does not fully qualify to be given this contract for products under this quadrant if there are other better options. It was noted that the firm made a serious net loss in the year 2013. It is an indication that the profitability of the firm is not consistent. It is necessary to select a firm that is consistent in its operations and financials.
• Leverage items
  Items falling under this quadrant are of great financial impact to an organisation, but they can easily be found in the market from various suppliers. Given that there are a number of suppliers in the market, these products are always obtained through tendering in order to select a firm that offers the best quality at the most desirable price. Based on the ratios obtained about this firm, it may qualify to deliver products under this quadrant to Facilities Management Services if its quotations are considered the best among the rest.
• Bottleneck items
  The bottleneck items are those with low financial impacts on an organisation, but with high supply risk because there may be one or two suppliers in the market. Given the scarcity of the product in the market, a firm may find it necessary to find a reliable supplier that can deliver consistent value to the client. If the organisation whose financials have been analysed in the section above offers products under this contract, then it may be considered for sourcing services for Facilities Management Service.
• Non-critical items
  Non-critical items are those with low financial impacts on a firm and are abundantly available in the market. In case the organisation offers products in this quadrant, then it may be given the contract of supplying the needed products only if it offers a competitive price and quality compared to what its competitors offer in the market.

PESTEL Analysis

The analysis of the external environment of Facilities Management Services may help in determining if the organisation selected is justifiable to be awarded the contract of supplying various products to this company. The political environment in the United Arab Emirates has been conducive despite the political unrest in the region. The country has been safe for the business fraternity, and this is an assurance for Facilities Management Services that its activities will not be negatively affected in the market. Sourcing will, therefore, be of great importance to it.

The economic environment in the United Arab Emirates has remained relatively stable despite the volatility of the international markets. The country is shifting from overreliance on oil and gas to the service industry. The diversification has been a major boost in improving the economy of the country. Facilities and Management Services is poised to achieve greater success in this market based on the current economic growth, making it is necessary to outsource some of the services to improve its efficiency.

The social environment in the country may also help in boosting the economic success of this firm. Majority of the locals have embraced Islamic culture and beliefs. However, major cities such as Dubai and Abu Dhabi have attracted foreigners from all over the world, making it a cosmopolitan area with a highly diversified culture. This diversity may make it necessary for this firm to outsource some of its activities because of the need to offer products that meet varying needs of clients. It may focus on activities it can do best, and consider outsourcing others which may be complex for its workforce.

Technology is another important factor that a firm may need to consider when choosing a firm that should be awarded a given contract to supply specific products or services. The United Arab Emirates is one of the countries that have embraced technology in various aspects of life. In shopping, education, entertainment, sports, security, and all other major sectors in the country, technology plays a very critical role. The organisation should only be considered if it offers technologically relevant services based on the current situation in the country.

The issue of ecology is increasingly becoming relevant in the United Arab Emirates and the rest of the world. The United Nations’ Conference of Parties held in Paris France in December 2015 (COP 21) outlined measures that countries should observe as a way of protecting our environment. Firms in the country have the obligation to ensure that the environment is protected. The organisation selected must offer products or services which are environmentally conscious.

The legal environment is another issue in the external environment that should be given serious consideration when planning to outsource some of the services to an outside firm. Facilities Management Services has an obligation to ensure that all the legal requirements set by the federal and local governments are met in all the business relationships it will have with the organisation. Before being considered for the contract, the organisation must be duly registered by the relevant government authorities and its activities must be legal.

Further information needed about the firm

The financial details about the organisation are relatively convincing and may make it seem qualified for the contract. However, some pre-qualification details about the firm will be needed. For instance, it will need to provide details of similar projects it has conducted with other firms and how the outcome was. This will inform the decision that will be made by the Facilities Management Services about the ability of the organisation to meet the expectations.

The organisation should also provide details about its current contracts, its capacity, and the workload it is currently managing. According to Mackie, it is not advisable for a firm to undertake several contracts concurrently because this may overwhelm it (73). This organisation can only be assigned the contract if it is established that its current contracts and workloads will not interfere with its capacity to deliver the needed services.

The management of the contracting firm will also need to demand for the details of project management. Before the contract can be assigned, the organisation will need to provide a detailed explanation on how it will undertake the activities assigned to it or how it will supply the needed products. The contract can only be given to the organisation if its project plan meets the expectations of the contracting firm.

Finally, the Facilities Management Services will need a detailed explanation of how the delivery will be made. The proposed delivery method should be simple and convincing to the management of the outsourcing firm.

Conclusion and Recommendations

The critical analysis of the organisation’s finances has been done, and it is clear that it meets the basic requirements needed for it to be considered for the sourcing exercise for Facilities Management Services. Besides the basic requirements stated in the section above, Facilities Management Services should also demand for the following from the organisation before assigning it the contract.

• The organisation should prove beyond doubt that it has financial stability.
• Its quality assurance system must meet the expectations of the Facilities Management Services.
• It should have a good track record in the assignments it shall be contracted to undertake.

References

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