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Course 3 Strategic Sourcing (Phương) - Coggle Diagram
Course 3 Strategic Sourcing (Phương)
Strategic sourcing- Part 1
Seven step
Step 1- Profile the Category
Deliverables
Complete cateory profile
Major activities
Use information from your stakeholders
Define sourcing category
Perform market analysis and explore category evolution
Identify category characteristics
Step 2- Develop category sourcing strategy
Major activities
Understand buying power
Category criticality to position the sourcing category
Determine sourcing approach to maximize the savings/value opportunity
Deliverables
Provide initial sourcing approach
Step 3- Generate supplier profile
Step 4- Choose competitive selection or supplier development
Step 5- Select competitive suppliers and negotiate
Step 6- Implement
Step 7- Continous improvement
Create Shareholder Value
Increase revenues
Raise prices
Increase volume
Decrease costs
Reduce cost of employees(downsize)
Reduce cost of process and waste
Reduce cost of goods and services
Portfolio analysis
Routine commodity
Leverage commodity- preferred supplier
Critical commodity- strategic supplier
Bottleneck commodity- transactional supplier
5 Forces methodolgy
Bargaining power of suppliers
Bargaining power of buyers
potential new suppliers
Substitues
Supply market competition
Purpose of analysis
To understand better your relative position towards the suppliers market, upstream market, new entrants, substitutes
The Kraljic Matrix
DEFINE
Used by organizations to help them work smartly with their suppliers.
Segment the supplier base.
Help companies in maximizing supply security and reduce costs by using most of their purchasing power.
Classic two-by-two matrix
Leverage items
high profitability but a low-risk factor
buyers possess the balance of power in the relationship and leverage this strength to gain greater returns.
Abundant supply
Bottleneck items
are the opposite of leverage items.
These are products with a limited source of supply
Their supply risk is high, but they do not have a major profit impact
the strength is in the hands of the supplier.
Production - base scarcity
Non-critical items
low risk and have a low impact on organizational profitability.
The common example for this segment is office supplies.
Abundant supply
Strategic items
These items are only represented or made by a handful of suppliers.
Development of long term relationship
have high supplier risk and high-profit impact
Natural scarcity
Strategic sourcing- Part 3
Step 6- Implement
Major activities
Develop savings/value measurement and tracking process
Develop implementation plan/Finalize contract
Execute implementation plan/contract
Deliverables
Implementation plan/contract
Cost savings/ Value tracking reports
Step 7- Continous improvement
Major activities
Post award audit and compiance
Contract management and adminisration
Tracking supplier performance
Cost savings/ Value trackings
Supplier relationship management
Deliverables
Cost savings/ value reports
Contract and compliance revews
Contract Driven performance reports/ Supplier rating systems
Step 5- Select competitive suppliers and negotiate
Major activities
Receive and evalute proposals
Develop negotiation strategy
Develop and distribute the proposal
Hold negotiations
Identify a preliminary solicitation/ negotiation plan
Deliverables
Proposal
Proposal respones & Negotation
Final supplier selection
The 7 Step Strategic
Sourcing Process
The main objective
to save money
improving the acquisition process
improving supplier performance and minimizing risk
7 Step
Step 2 - Supply Market Analysis
Kraljic’s Matrix is seen as one of the most effective ways to segment the vendor base
Study the cost components of the product or service, and analyze the suppliers’ marketplace for risks and opportunities
Identify potential new global and local suppliers.
Step 3 - Develop the Strategy
deciding where and how to buy while minimizing the risk and cost.
Step 1 - Profile the Category
analyze your users
current prices and suppliers, and specification details
defining the category and commodities including the volumes (quantity, types and sizes) spent on products and services
Step 4 - Select the Sourcing Process
Used Request for Proposal (RFP).
Step 5 - Negotiations and selection supplier
shortlist the most potential suppliers, then interview for clarification or asking more details if needed
may have many suppliers that respond to RFP.
Step 6 - Implement & Integrate
may have the decision of what suppliers you want to partner with.
Notify the successful suppliers and ensure that they are
involved in the implementation process.
It’s critical to integrate suppliers into your meetings or discussions included in the implementation stage
Step 7 - Benchmark & Track Results
starting with benchmarking the current status of the commodity or category, monitoring the results and ensuring that full value is being achieved.
It’s essential to measure the supplier’s performance over time
quickly identify the problem during the implementation and notify your supplier to address the issue with the lowest business impact.
Strategic sourcing- Part 2
Step 3- Generate supplier profile
Major activities
Identify existing supplier base
Identify potential suppliers
Establish supplier minimum requirements
Establish supplier selection criteria
Develop quantiative supplier evaluation
Deliverables
List of potential supplier
Supplier selection criteria
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Step 4- Choose competitive selection
or supplier development
Major activities
Define altermative strategies
Select implementation path
Deliverables
Decision on strategic
implementation path
Competitive selection
Supplier development
Strategic Sourcing
Understanding Tactical Sourcing
to achieve the lowest possible cost without considering other factors like supplier relationship management, supply chain risk
mitigation, etc
bring gains in the short-term, it prohibits sustained optimization of its sourcing activities.
short-term and traditionally reactive approach towards managing the sourcing activities of an organization.
compared to strategic sourcing, tactical sourcing doesn’t necessitate large investments in advanced technological platforms and personnel skillsets
Understanding Strategic Sourcing
involves developing a proactive, holistic, and continuous evaluation and re-evaluation of the sourcing activities in an organization.
to achieve the lowest Total Cost of Ownership (TCO) along with minimal supply chain risk.
The customer-supplier loop is assessed at every stage
Definition
The most important process in Category Management
the process of identifying the spend profile of an organization and its supplier
7-Step Process to Effectively Implement Strategic
Sourcing in your Organization
Analysis of the Supplier Market
Request for Supplier Information and Identification
of Selection Criteria
Building a Sourcing Strategy
Selection of Suppliers and Execution of Contracting
Process
Identification and Categorization of Spend Profiles
Measurement and Periodic Tracking of Supplier
Performance
Implementation of Supplier Relationship
Management (SRM
4 Key Benefits of Strategic Sourcing
Better Alignment of Sourcing and Business
Objectives
Optimization of Ideal Suppliers
Increased Level of Cost Savings
Long-term Relationship Building with Suppliers
Factors Driving Automation of Strategic
Sourcing
Supply Chain Risk Assessment
Higher Level of Accountability while executing
Sourcing Projects
Robust Management of Key Spend Categories
Enhanced Data Reporting and Increased Visibility
into Sourcing Projects
Strategic sourcing
Ten Steps
3 - Select Sourcing Strategy
Risk Assessment.
• ROI of selected strategies.
• Contingency plan if necessary.
• Methodology and/or Process to be followed.
• Communication to Stakeholders and Executives
4 - Identify Supplier Portfolio
Market Research, RFI, Internet.
• Consider all viable suppliers.
• Do not discard any Supplier at this stage.
• Define unbiased criteria for Supplier selection.
• Strategic fit analysis
2 - Profile Category
Strategic Positioning.
• Supply Market Analysis.
• Gap Analysis.
• Start to assemble a written Strategic Sourcing Plan.
• The most time-consuming of the whole process
5 - Select Sourcing Process
RFX, Direct negotiation, negotiation -Auctions͕ ͙ Consider all Options.
• Define selection grid with criteria, measures and weights.
• Produce a written sourcing plan approved by Executive Sponsor
1 - Organize Sourcing Team
6- Define short-list and implement strategy
Deploy beforehand selected sourcing process, RFx͕ ͙ etc͙
• Shortlist suppliers according to Pre-established criteria.
• Establish baseline.
• Implement previously defined strategy.
7 - Negotiate and Award Contract
• Prepare negotiation team.
• Outline negotiation strategy to follow with suppliers.
• Set roles and objectives.
• Understand negotiating position: MDO, LAA, BATNA,levers, possible concessions,
• Close negotiation with win -win sentiment on all parties.
8 - Implement Contract
• Create transition plan and communicate to users.
• Involve supplier(s)
• Review processes and procedures.
• Review KPI͛s and SLA͛s with supplier;sͿ and stakeholders͘
• Initiate and maintain continuous improvement.
• Define reporting during transition and afterwards.
9 - Evaluate and develop supplier
• Follow -up performance metrics that have been agreed
Identify and launch supplier development project
10 - Improve sourcing process
• Conduct ͞lessons learned͟ workshops͘
• Plan for the next improved sourcing exercise.
• Apply Kaizen principles.
• Review written sourcing plan and adjust if necessary.
Key success factors
Global transformation plan
Cross -functional talents
Speaking with one voice
information should be communicated
should or should not be communicated
Who should communicate information
How information should be communicated
Stakeholder involvement
Total Cost of Ownership
Written Sourcing Plan
Define
Structured and collaborative approach to leveraging targeted spend across the organization with select suppliers that are best suited to create value from the external resources of the company.