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  • 1. Commodity Management Commodity Management and Strategic Sourcing Methodology Delivering Savings, Benefits & Improvements. By Grahame Cottam
  • 2. Sourcing Methodology - Process
    • Develop Commodity Team
    • Identify Opportunities and Issues
    • Understand user needs and Internal Requirements
    • Prioritize Opportunities
    • Obtain Key Stakeholders Buy-in
    Identify Opportunity Team Set Up Spend Analysis Market Intelligence Sourcing Team Strategy End Negotiation Negotiation Sustaining Change Implementation Analysis Negotiation Implementation
    • Identify External Spending and Related Costs
    • Conduct External Market Analysis
    • Initial Supplier Screening
    • Develop the Total Cost of Ownership Model
    • Develop Supplier Selection Criteria and Weightings
    • Determine Impact on Internal Stakeholders
    • Determine Impact on Community
    • Develop the Supplier Base
    • Evaluate Supplier Response
    • Conduct Final Supplier Screening
    • Select Negotiation Method
    • Conduct Final Negotiation
    • Make Final Selection
    • Communicate Selection
    • Develop Service Level Agreement
    • Business Case
    • Select Implementation Team
    • Scope identification and impacts
    • Develop Implementation transition and communication Plan
    • Execute plans
    • Develop Performance Measures
    • Monitor and Report Progress
    • Establish Continuous Improvement Process
    • Update negotiation
    • Contract Management
  • 3. Sourcing Methodology - Analysis
    • Analysis of Needs
    • Supplier Analysis
    • Number of Suppliers
    • Uniqueness of offering
    • Cost/ease of switching supplier
    • Suppliers willingness to help
    • Analysis of Business needs
    • Number of buyers
    • Customer requirements
    • Purchasing power of buyer
    • Ability of supplier to switch to alternative buyer
    • Supplier Base
    • How Many similar competitors - ease of switching
    • Uniqueness of your offering
    • Quality differences
    • Customer, (patient), loyalty
    • Does the supply market/existing relations demand a particular approach to the sourcing exercise?
    • Commercial Requirements
    • Price
    • Credit Terms & Terms of doing business
    • Lead time
    • Ordering Quantities
    • Reliability of Supply (quantity adherence, capacity availability & flexibility)
    • Long Term Commitment
    • Verify Needs
    • Are we too constrained by our
    • requirements?
    • Look at Risk/Cost vs benefit of changing some of the needs
    • Credit Terms
    • Order Quantities
    • Lead Times
  • 4. Sourcing Methodology
      • Motivation
        • Small steps that are individualised
      • Involvement
        • For as many people as possible
      • Simple Steps
        • Application of understood steps
      • Measure against targets
        • Regular feedback allows problems to be spotted and dealt with
      • Early success
        • Celebrate to increase motivation
      • Sustaining program
        • Ingrain the good habits
  • 5. Sourcing Methodology Supplier Selection
    • Sourcing Team Strategy
    • Develop Supplier Selection Criteria and
    • Weightings.
    • Determine Impact on Internal Stakeholders
    • Understand Impact on Community / Patients.
    • Produce the Request for Proposal – eCommerce, traditional methods.
    • Product Specification.
    • Expected Product Performance.
    • Supplier Knowledge of process.
    • Pricing
    • Credit Terms
    • Terms of Business
    • Lead Time
    • Ordering Quantities
    • Capacity to meet requirements
    • Transparency of relationships
    • Management interest in account
      30% Pass Price   5% Pass Financial Strength   5% Pass Reputation   5% Pass Lead Time   15% Pass Credit Terms   15% Pass Relevant Experience   25% Pass Ordering Quantities Comments Weighted Score % Pass/Fail Area
  • 6.
    • Evaluate Supplier (s) responses against weighted requirements.
    • Negotiate & clarify with potentials-inform them of areas of weakness in bid.
    • Inform those not selected of decision and reasoning.
    • Agree trial process and caveats associated with limited production runs. (To be agreed between supplier & internal interested parties).
    • Implement trial and keep all parties informed of issues arising.
    Sourcing Methodology Supplier Selection
  • 7. Sourcing Methodology - Negotiation
    • Evaluate Request for Proposal Response and Conduct Final Supplier Screening
      • Stakeholder involvement
      • Check for innovation within offer
    • Select Negotiation Method and Conduct Final Negotiation
      • Number of potential suppliers
      • Time to complete negotiation
    • Make Final Selection and Communicate Selection
      • Stakeholder involvement
      • Advise / prepare all parties with potential to use opportunity
    • Develop Service Level Agreement
      • Use scope of supply and stakeholder inputs to confirm need
      • Any Contractual variation verified with legal Department
    • Complete Business Case
      • Summarize actions and methods used in project
      • Reference for users – change of personnel
    Continual Feedback
  • 8. Sourcing Methodology - Implementation
    • Select Implementation Team
      • Stakeholder, Commodity Team
      • Invite nominations
    • Develop Implementation Transition Plan and Communication Methods
      • Simplicity / complexity of product / service offering
      • Scale of project, number of stakeholders affected
    • Execute plans
    • Develop Performance Measures, Monitor and Report Progress
      • Agreed vendor KPIs with supplier and stakeholders and frequency
      • Invite feedback from stakeholders
    • Establish Continuous Improvement Process
      • Monitor negotiated improvements – validate against KPIs
      • Timed actions on supplier and stakeholders – with feedback
    • Contract Management - Update negotiation
      • Enhance where advantages / improvements being made
    Continual Feedback
  • 9. Sourcing Methodology - Summary
    • Understand the market
    • Understand stakeholder needs from providers
    • Involve key stakeholders in process
    • Integrity of sourcing process
    • Continuous feedback loops – continuous improvement