Supply chains and associated management processes have been invisible to public sector clients as the government has highly focused on the contracting process with first-tier suppliers. The 2004 PAC Report on ‘Improving departments' capability to procure cost-effectively’ highlighted how only 17% of departments, agencies, and non-departmental public bodies analyze their suppliers’ supply chains as part of their criteria for selecting suppliers and thus suffer from a lack of assurances about the reliability and resilience of their key suppliers’ subcontractors.
There are a number of clear benefits of professional supply chain management in the public sector to improve efficiency and transparency in the management.
In an increasingly complex delivery landscape, effective risk allocation is a critical consideration in procurement. Risk should always be allocated according to the party best placed to manage it, and a better understanding of the way in which the requirement can be delivered.
Better visibility of subcontracting opportunities for various organizations that bring increased competition, dynamism such as SMEs, VCOs, BMEs, women-owned businesses, and social enterprises. This can increase competition and allow organizations with particular skills or strengths to get involved in the public sector marketplace.
Supplier innovation in the Supply Chain can contribute to better quality, faster delivery, and reduced whole life costs. Effective Supply Chain Management offers strong potential for innovation to be released through the supply chain.
Better-defined requirements through early supply chain involvement in the shaping of the business need. The case for early Supply Chain involvement is likely to be stronger in output or outcome-based approaches or where the requirement is complex or innovative. The involvement of the SC at an early stage can be vital in establishing the right requirements and the approach to meeting them.
These benefits can lead to increased value for money and efficiency for an individual contracting authority. There are also wider benefits for the public sector as a whole:
Supply Chain Management can contribute to improved long-term sustainability and better capacity management of supply markets through the availability of a more competitive and diverse supply base at the subcontractor level.
Effective use of the Supply Chain contributes to the wider agenda of improving efficiency and value for money in the public sector’s commercial activities, by promoting competition, not just at the first-tier supplier level, but across the wider supply base and also encouraging more efficient management of suppliers. It is important that the authority takes appropriate steps to ensure that the first tier supplier(s) have the capability to manage their Supply Chain to the ultimate customer’s benefit, and to deliver value for money in public sector contracting.
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