By Source One Management Services
By Nicole Mahaffey, Project Analyst
Drawing on the ideas of the masses to devise new goods or services is a concept now spreading to procurement. For example, a U.S. company, Threadless T-shirts, sources its entire product development--in the form of designs for T-shirts--from the crowd, with artists submitting concepts and then everyone voting on which ones continue to production. This form of procurement is becoming more apparent in numerous organizations, because it allows companies the ability to gain access to thousands of new suppliers from all over the world and encourages them to submit bids for specific pieces of work.
Even government organizations are using crowdsourcing for procurement. One recent example of crowdsourcing is taking place in Alaska. The state legislature finally agreed on a budget for next year, but it relies on spending $3.5 billion from the state’s savings. Consequently, most models show all of the state’s reserves being used by 2021, if not sooner. How is the state of Alaska going to solve this imminent problem? By letting the people decide.
The government is using the “ISER Interactive Fiscal Policy Model V1” worksheet and game to allow people, “suppliers,” from around the world the opportunity to submit their bids about how they would overcome the state’s fiscal challenges. “Suppliers” can plug in data, change assumptions, and chart the course of future finances. The game, made by economist Scott Goldsmith, a University of Alaska Anchorage professor emeritus, allows people the ability to predict future oil prices, decide how much to increase or decrease income and sales taxes, cut departments, and more (UAA Institute of Social and Economic Research).
These “suppliers” are faced with a difficult task, and have to make an exceptional bid in order to beat the bids of the incumbent, the Alaskan government. Those that tried the game stated that they were having a difficult time getting out of the red, even on paper. Larry Persily, former Deputy Commissioner of Revenue has been analyzing and writing about Alaska’s fiscal situation for 40 years and says that the state has relied on oil revenues to bail it out of crises for decades and it just won’t work anymore. “No more IOUs to collect. No more windfall tax revenues coming in. What’s there is there. It’s running out. It’s the day of reckoning. We’ve got to figure out how we’re going to pay for services for the decades ahead, even for the years ahead, because those savings could be gone in a few years (Crowd-Sourcing Alaska’s Fiscal Future).”
What is great about this method of procurement is that it gives everyone the opportunity to submit a bid, i.e., play the game. It doesn’t matter what your background is or where you are in the world, you can access the game online and therefore the Alaskan government has bids from people around the world. This concept is consistent with that discussed in Building a Sourcing and Procurement Team of Leaders and Learners, written by William Dorn. Dorn explains: “Companies should focus on understanding the individual talents of each person in the group and capitalize on their strengths.” Expanding the talent pool to include not only Alaskan government employees, but also millions of people around the world, the state of Alaska is able to gain diverse talents and capitalize on the strengths of all those involved.
One woman, whose resume includes everything from gold miner to North Slope worker to water sales rep, was asked to look at the spreadsheet of Alaska’s financial future. By increasing some taxes, cutting departments and manipulating spending she was able to increase revenue by more than $40 billion over the next 15 years. Unfortunately, that still isn’t even close enough to the amount that the state needs in order to function at current levels (Crowd-Sourcing Alaska’s Fiscal Future).
The crowdsourcing results will be presented by The Department of Revenue to legislature in the fall. While this crowdsourcing will give the government and the Alaskan people an idea of what should be changed, they will still have some difficult decisions to make and perhaps even more trouble implementing the policies they came up with on paper. Hopefully by crowdsourcing, the government will be able to procure some exceptional bids on how to get Alaska out of the red.
Here is the link in case you want to try the game for yourself: http://www.iser.uaa.alaska.edu/news/?p=909
Nicole Mahaffey is a Project Analyst at Source One Management Services, LLC. In her role, Nicole is adept in executing strategic sourcing initiatives; conducting comprehensive research, vetting suppliers, and developing RFPs with great attention to detail. She is a proven asset in providing detailed financial analysis and creative solutions for client cost savings.
Source One has been a leading Procurement Service Provider supplementing client resources with cost reduction, strategic sourcing services and spend management solutions since 1992.
Source One's experienced sourcing professionals work closely with clients' in-house staff to reduce spend, optimize existing budgets and increase the efficiency of operations by using proven sourcing and purchasing strategies, best practices, innovative technologies, and an unsurpassed database of market intelligence to help clients achieve the maximum level of savings possible. Ongoing monitoring and monthly audit processes further ensure that savings remain competitive and sustainable.
The Source One process develops a secure and responsive supply base that is capable of providing quality, delivery, costs, technologies, flexibility and services to meet the current and future business needs. Source One has strategic sourcing and cost reduction solutions for businesses of all sizes, from the small to the mid-market and including the Fortune 500. More on the web at www.SourceOneInc.com
George E. Krauter
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