Karen A.F. Landale, Aruna Apte, Rene G. Rendon and Javier Salmerón
The purpose of this paper is to show how data analytics can be used to identify areas of potential cost savings for category managers of installation-level services. Using…
Abstract
Purpose
The purpose of this paper is to show how data analytics can be used to identify areas of potential cost savings for category managers of installation-level services. Using integrated solid waste management (ISWM) as a test case, the authors also examine the impact of small business set-asides on price and contractor performance.
Design/methodology/approach
The authors use data analytics, specifically sequential regression, the Wilcoxon rank-sum test and ordered logistic regression to investigate the influence of service- and contracting-related variables on price and contractor performance.
Findings
The authors find that service- and contracting-related variables influence price. Specifically, they identify that a service-related variable, number of containers, significantly affects price, and that two contracting-related variables, one type of small business set-aside and the number of offers received, also significantly affect price. The authors quantify the price premiums paid for using various types of small business set-asides.
Research limitations/implications
Although the findings were significant, the authors believe that the robustness of the conclusions could be enhanced if the Air Force captured more data. Additional observations would increase the generalizability of the results.
Practical implications
This empirical experiment demonstrates that detailed analyses are required to gain insights into services’ price drivers to craft more appropriate category management strategies for installation-level services.
Originality/value
This empirical study shows how historical data can be used to assess price drivers of installation-level services. It is also one of the first to quantify the impact that small business set-asides have on price.
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Karen A.F. Landale, Rene G. Rendon and Timothy G. Hawkins
The purpose of this research is to explore the effects of supplier selection method on key procurement outcomes such as procurement lead time (PLT), supplier performance and buyer…
Abstract
Purpose
The purpose of this research is to explore the effects of supplier selection method on key procurement outcomes such as procurement lead time (PLT), supplier performance and buyer team size.
Design/methodology/approach
Data were collected from a sample of 124 archival contract records from the US Department of Defense. A multiple regression model and multivariate analysis of covariance/analysis of covariance models were used to test the effects of source selection method on pertinent procurement outcomes.
Findings
The trade-off (TO) source selection method increases PLT, as does the number of evaluation factors and the number of proposals received. Substantially larger sourcing teams are also associated with the TO source selection method. Nonetheless, the TO method results in better supplier performance.
Practical implications
TO source selections yield superior supplier performance than low-bidder methods. However, they are costly in terms of time and personnel. Any assessment of supplier value should consider not only the price premium for higher performance but also the transaction costs associated with the TO method.
Originality/value
Very little research addresses a buying team’s evaluation of supplier-offered value ex ante and whether that value assessment materializes into actual value-added supplier performance. Low bidder tactics are pervasive, but price (i.e. sacrifice) is only one component of value. Benefits from superior supplier performance may yield greater overall value. If value is critical to the buyer, a TO source selection method – versus a low-bidder approach – is the appropriate tool because of higher supplier performance ex post.
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Aruna Apte, Corey Arruda, Austin Clark and Karen Landale
In an increasingly budget-constrained environment, the Department of Defense (DoD) must maximize the value of fiscal resources obligated on service contracts. Over half of DoD…
Abstract
Purpose
In an increasingly budget-constrained environment, the Department of Defense (DoD) must maximize the value of fiscal resources obligated on service contracts. Over half of DoD procurement spending between 2008 and 2012 was obligated on service contracts (GAO, 2013). Many services are common across the enterprise and recurring in nature; however, they are treated as unique and procured individually at the base level, year after year, rather than collectively in accordance with a larger, enterprise-wide category management strategy. The purpose of this paper is to focus on creating a methodology that treats common, recurring service requirements in a more strategic manner.
Design/methodology/approach
The authors develop a standardized, repeatable methodology that uses relevant cost drivers to analyze service requirements to identify more efficient procurement strategies. Furthermore, they create a clustering continuum to organize services based on proximity between the customer-supplier bases. This paper uses a commercial business mapping software to analyze cost driver data, produce visualizations and illustrate strategic opportunities for category management initiatives. DoD requirements for Integrated Solid Waste Management (ISWM) within the Los Angeles area are evaluated using the software and methodology to demonstrate a model for practical application.
Findings
The authors find that commercial software can be used to cluster requiring activities needing common, recurring services. This standardized, repeatable method can be applied to any category of services with any number of cost drivers. By identifying optimal requiring activity clusters, procurement agencies can more effectively implement category management strategies for service requirements.
Research limitations/implications
The initial approach of this paper was to develop a macro-level, one-size-fits-all model to centralize procurement. The authors found this approach inadequate as they tried to group service requirements of wildly differing characteristics. They experienced other significant limiting factors related to data availability and data collection.
Social implications
Clustering common and recurring DoD service requirements would result in standardized levels of service at all installations. The demand savings from clustering would promote the implementation of best practices for that service requirement across the DoD, which would eliminate non-value-added activities currently performed at some installations, or gold-plating of requirements, which is also likely occurring.
Originality/value
This paper is the first to use an analytics-based methodology to cluster common, recurring public services. It is the first method that offers a standardized, repeatable approach to implementing category management of service requirements to achieve cost savings.