Strategic sourcing in UK universities: becoming ‘intelligent customers’

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Universities are beginning to discover the benefits of new business models in their dealings with suppliers, say researchers at the University of the West of England. They argue that institutions should become ‘intelligent customers’, which will involve investment in new skills, changes in culture and raising the profile of procurement and supply professionals.

Dr Wendy Phillips and Dr Dharm Kapletia of the Bristol Business School, University of the West of England (UWE) have been investigating the sourcing strategies and practices of UK HEIs and assessing what can be learnt from experiences of other sectors and expert organisations. They will be presenting their findings at the Strategic Sourcing: new approaches to deliver success conference on 4 February and the Strategic Sourcing Toolkit is now available.

The UWE team have engaged with top-level managers from UK HEIs as well as public, private and independent expert bodies to capture lessons learnt from outsourcing processes. The project findings confirm that HEIs are at an early stage of maturity in terms of working with external service providers, yet have identified the potential for a variety of sourcing models to deliver economic, efficiency and effectiveness benefits.

Mission, identity and future challenges

To succeed, strategic sourcing decisions need to be linked to the institution’s mission, identity and future competitive challenges and the qualitative benefits of any sourcing arrangement must be considered – the focus should not be based simply on cost; end-customer satisfaction must be on the agenda.

At present, HEI procurement functions lack the skills and confidence to deal with large scale sourcing activities. Fortunately, strategic sourcing does not necessarily need to be pursued in this way – there are a variety of innovative models that HEIs can employ as either an alternative to, or as a first step towards outsourcing that can realise efficiency and effectiveness benefits.

The research indicates there may be the potential for shared services, but the autonomous nature of HEIs and their differences in strategic goals currently inhibit progress in this area. In addition, despite the need to establish sound governance arrangements, many HEIs fail to integrate such arrangements into their contracts, undermining the ability to maintain the level of relationship required to leverage benefits.

Working with BUFDG and the UK Purchasing Consortiums, the team’s recent survey captured the views of Vice Chancellors, Directors of Finance and Procurement, and other senior staff on the subject of ‘strategic sourcing’.

Key initial findings

  • Although HEIs outsource close to 60 types of outsourced services,  these are almost entirely ‘support services’
  • The majority of HEIs have benefited in the past from some form of outsourcing. Nearly two thirds fully outsource to private sector providers, and just under a third outsource fully or partly to public/not for profit organisations. A small number co-source with the private sector.
  • There is little difference in the proportion of HEIs focusing on economic, efficiency or effectiveness benefits, with most arrangements concentrating on: improved productivity, risk reduction or student satisfaction.
  • The VAT consideration was found to be a significant barrier in outsourcing to the private sector, although it was recognised that a good proportion disagreed or were unsure.
  • Pressure from trade unions was not seen as a significant obstacle  to the full exploration of sourcing options.
  • There appears to be significant uncertainty about whether Shared Services with other Universities presents a superior sourcing option compared to outsourcing to the private sector

Academic delivery and revenue generation were not commonly identified as areas that might benefit from strategic sourcing. Based on the qualitative findings of the project, the research team argue that HEIs should prioritise these benefits to offset the reduction in central government funding and improve their ability to differentiate themselves both nationally and internationally. Where there is potential for growth, collaborative sourcing models such as joint ventures may present new strategic options and help improve HEI competitiveness.

Only a handful of HEIs stated that their core business was more than ‘teaching and research’. Other areas considered core were: social responsibility, support to local enterprise and community, and a commercialisation strategy that seeks to generate revenue from the institution’s assets. This is an important issue for all HEIs and will help drive innovation in the institution’s choice of sourcing models. An example of this includes a social enterprise based Facilities Management organisation with the goal of ‘improving local employment’ as part of its mission.

The full findings of this research will be shared online through a Strategic Sourcing Toolkit and a final report will be made available.

The project was funded by the Innovation and Transformation Fund and delivered by Dr Dharm Kapletia, Senior Research Fellow, University of the West of England and Dr Wendy Phillips, Associate Professor, Strategy and Operations Management, University of the West of England.

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