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G Cottam Strategic Sourcing


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G Cottam Strategic Sourcing

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