Value based sourcing aims to maximize value and minimize costs in procurement. Business value can be incorporated into existing sourcing processes through three steps: 1) Understanding how suppliers can create value in different business situations, 2) Defining the business impact and measuring success criteria, 3) Choosing business value tools to work more with value in sourcing. Securing mandate to expand beyond cost savings is important to realizing full impact.

1. Value based sourcing put into practice
Inspiration for an expanded sourcing toolbox

2. Solution
Buying®

3. Costs and value are two inherently distinct elements of a
purchase, to be minimized and maximize respectively
What
Why
Costs
Value
Specifications
Features
Capabilities
Solution to pain
Value chain nValue chain 1 Value chain 2
Own value
creation

4. Business value can be incorporated into most existing
sourcing processes
CATEGORY PROFILING SOURCING STRATEGY SOURCING EXECUTION CATEGORY MANAGEMENT
Specifications
Use cases, map technical
specifications, quality and legal
requirements
1
Impact
Mobilisation, scoping, set objec-
tive and savings target, identify
and evaluate effective sourcing
levers, make or buy decision
5
RFx design
Define evaluation criteria and
specifications, prepare RFx
material and define commercial
and contractual terms
9
Contract management
Establish change control,
implement contract,
implementation & communication
plan, implement TVO changes
13
Business value
Implications on value and supply
chain, create TVO model,
stakeholder identification, impact
on change activities
2
Capabilities
Internal capabilities, market scan
for external suppliers, need for
ext. competencies
6
Tendering
Launch strategy, Send out RFI,
RFP, RFQ and scoring model.
Manage supplier communication
10
P2P
Implementation of procure-to-pay
incl. catalogues, roles and
responsibilities, internal sales kit
and relations, compliance and
cost control
14
Spend pattern
Categorization, baseline definition
and forecasts, cost drivers, terms
and conditions
3
Strategizing
Outline 2-3 scenarios, incl. current
strategy, for future sourcing
model, internal + ext. assessment
of risks/benefits
7
Evaluation
Dialogue, quantitative supplier
response evaluation, short-list,
prepare negotiation
11
Value tracking
KPI monitoring and dialogue with
business to ensure “value for
money”
15
Market analysis
Segmented industry trends & best
practice, supply & demand levers,
competency benchmark, analyse
suppliers & contracts, reciprocity
analysis
4
Project plan
Detail preferred scenario,
activities, road map, resources
and time plan
8
Agreement
Conduct contractual and
commercial negotiations, award
and finalise contract, de-brief
suppliers
12
SRM
Collaborate with key suppliers to
maximize mutual value creation,
internal improvements, lessons
learned
16
PROCUREMENT
G1
Gate
G2
Gate
G3
Gate
G4
Gate
Strategy
Role in business, maturity and
development, budget and mandate
Organisation
Operating model, roles and
responsibilities, competencies
Processes
Interaction with requestors and
consumers, sourcing and procurement
model
Systems
Procurement set-up in ERP, Master
data, reporting, procurement tools
A B C D

5. At Implement Consulting Group, it is explicitly nested in
three steps but permeates the entire process
CATEGORY PROFILING SOURCING STRATEGY SOURCING EXECUTION CATEGORY MANAGEMENT
Specifications
Use cases, map technical
specifications, quality and legal
requirements
1
Impact
Mobilisation, scoping, set objec-
tive and savings target, identify
and evaluate effective sourcing
levers, make or buy decision
5
RFx design
Define evaluation criteria and
specifications, prepare RFx
material and define commercial
and contractual terms
9
Contract management
Establish change control,
implement contract,
implementation & communication
plan, implement TVO changes
13
Business value
Implications on value and supply
chain, create TVO model,
stakeholder identification, impact
on change activities
2
Capabilities
Internal capabilities, market scan
for external suppliers, need for
ext. competencies
6
Tendering
Launch strategy, Send out RFI,
RFP, RFQ and scoring model.
Manage supplier communication
10
P2P
Implementation of procure-to-pay
incl. catalogues, roles and
responsibilities, internal sales kit
and relations, compliance and
cost control
14
Spend pattern
Categorization, baseline definition
and forecasts, cost drivers, terms
and conditions
3
Strategizing
Outline 2-3 scenarios, incl. current
strategy, for future sourcing
model, internal + ext. assessment
of risks/benefits
7
Evaluation
Dialogue, quantitative supplier
response evaluation, short-list,
prepare negotiation
11
Value tracking
KPI monitoring and dialogue with
business to ensure “value for
money”
15
Market analysis
Segmented industry trends & best
practice, supply & demand levers,
competency benchmark, analyse
suppliers & contracts, reciprocity
analysis
4
Project plan
Detail preferred scenario,
activities, road map, resources
and time plan
8
Agreement
Conduct contractual and
commercial negotiations, award
and finalise contract, de-brief
suppliers
12
SRM
Collaborate with key suppliers to
maximize mutual value creation,
internal improvements, lessons
learned
16
PROCUREMENT
G1
Gate
G2
Gate
G3
Gate
G4
Gate
Strategy
Role in business, maturity and
development, budget and mandate
Organisation
Operating model, roles and
responsibilities, competencies
Processes
Interaction with requestors and
consumers, sourcing and procurement
model
Systems
Procurement set-up in ERP, Master
data, reporting, procurement tools
A B C D

6. Tools from sales, business development and project
management can be leveraged in sourcing efforts
CATEGORY PROFILING SOURCING STRATEGY SOURCING EXECUTION CATEGORY MANAGEMENT
Specifications
Use cases, map technical
specifications, quality and legal
requirements
1
Purpose
Mobilisation, scoping, set objec-
tive and savings target, identify
and evaluate effective sourcing
levers, make or buy decision
5
RFx design
Define evaluation criteria and
specifications, prepare RFx
material and define commercial
and contractual terms
9
Contract management
Establish change control,
implement contract,
implementation & communication
plan, implement TVO changes
13
Business value
Implications on value and supply
chain, create TVO model,
stakeholder identification, impact
on change activities
2
Capabilities
Internal capabilities, market scan
for external suppliers, need for
ext. competencies
6
Tendering
Launch strategy, Send out RFI,
RFP, RFQ and scoring model.
Manage supplier communication
10
P2P
Implementation of procure-to-pay
incl. catalogues, roles and
responsibilities, internal sales kit
and relations, compliance and
cost control
14
Spend pattern
Categorization, baseline definition
and forecasts, cost drivers, terms
and conditions
3
Strategizing
Outline 2-3 scenarios, incl. current
strategy, for future sourcing
model, internal + ext. assessment
of risks/benefits
7
Evaluation
Dialogue, quantitative supplier
response evaluation, short-list,
prepare negotiation
11
Value tracking
KPI monitoring and dialogue with
business to ensure “value for
money”
15
Market analysis
Segmented industry trends & best
practice, supply & demand levers,
competency benchmark, analyse
suppliers & contracts, reciprocity
analysis
4
Project plan
Detail preferred scenario,
activities, road map, resources
and time plan
8
Agreement
Conduct contractual and
commercial negotiations, award
and finalise contract, de-brief
suppliers
12
SRM
Collaborate with key suppliers to
maximize mutual value creation,
internal improvements, lessons
learned
16
PROCUREMENT
G1
Gate
G2
Gate
G3
Gate
G4
Gate
Strategy
Role in business, maturity and
development, budget and mandate
Organisation
Operating model, roles and
responsibilities, competencies
Processes
Interaction with requestors and
consumers, sourcing and procurement
model
Systems
Procurement set-up in ERP, Master
data, reporting, procurement tools
A B C D
Gate

7. Brand and wider context
of company
Distribution, channels,
customer service, go-to-
market offering, etc.
Services related to
product
Product experience,
other attributes
Additional
product
functionality
Core product
functionality
The product: In most categories, we buy a lot more than
core product functionality
• Seen as environmentally friendly /
successful / patriotic by association
• Fast delivery time, local on-site delivery,
convenient service locations
• Car service, financing, automatic
updates and cost control
• Pleasant work environment in transit
• Being able to communicate in transit
• Getting employees between locations
Example – company cars solution

8. • The supplier is skilled
at using their category
competencies to
mature production and
secure effective
design for
manufacturing
• This is the supplier
core competency to
ramp up production
quickly and manage
any challenges which
might occur
• The supplier is a
skilled manufacturer
but appears to be less
competitive as
volumes rises
• Proactivity in
identifying optimization
opportunities is low
• The supplier is
focused on production,
but lack the
competencies to drive
product development
• The supplier has
outsourced this part of
their value proposition
and lack sufficient 2nd
tier supplier control
• The supplier is
focused on running
production but also
flexible in undertaking
various other tasks
unlike competitors
• The supplier offers
some service products
but does not fulfill the
MRO need
The business situations : The supplier can create value for
us and our customers in various business situations
POSSIBLE SUPPLIER VALUE CREATION IN VARIOUS PHASES
Product
Development
Maturing of
product,
prototyping
Development
of tools,
approaches
or methods
Start-up of
production
Production,
low volume
Production,
high volume
Service and
maintenance
Optimization
and
modification
1 5 3 5 4 3 3 2
1 - 2 Poor performance
3 - 4 Average performance
5 Strong performance
Score
Example – plastic parts outsourcing partner
for FMCG company

9. The value : Understand what creates value for you in a
category besides getting the core jobs performed
YOUR COMPANY NEEDSYOUR SUPPLIERS VALUE PROPOSITION

10. The value : Understand what creates value for you in a
category besides getting the core jobs performed
immediate tool
replacement
convenient
tool
procurement
Latest
technology
No cost for
repair and
replacement
Predictable
costs
Subscription
based fleet
management
Right tool,
right place,
right time
100 percent
uptime
Safe
employees
Work
enjoyment
Broken tools
Time lost in
maintenance
Upfront
investment
delays
Financial
penalties
get
construction
done
meet planning
schedule
Profitability
under control
YOUR COMPANY NEEDSYOUR SUPPLIERS VALUE PROPOSITION
Example – construction tools leasing for
building contractor

11. The value: Understand a category’s role in your own
company’s value proposition towards your customers
YOUR COMPANYYOUR SUPPLIERS YOUR CUSTOMERS

12. Define the business impact you are aiming for in your
sourcing effort
• <State the ultimate impact targeted>
• …
IMPACT CASE
<State desired impacts on relevant dimensions, e.g.:
• Customer performance
• Financial performance
• Process performance
• Compliance with external requirements
• Intangibles and other benefits>
<State the desired impacts along relevant dimensions, e.g.:
• Behaviours, such as specific practices applied
• Organisational capabilities demonstrated
• Technological capabilities demonstrated
• Competence, knowledge and abilities of employees>
SUCCESS CRITERIA
<Behaviour impact 3>
<Behaviour
impact 1>
<Behaviour
impact 2>
<Business
impact A>
<Business
impact C>
<Overall impact>
<Business
impact B>
<The top-level impact case
of the initiative is often
related directly to increasing
growth or profitability or
reducing costs.
State the effort’s success
criteria in this perspective .
EFFORT VISION
<State the overall effort vision, linking the project to the customers economic value creation and strategic priorities>
BUSINESS IMPACT
BEHAVIOUR IMPACT

13. Value must be something which can be measured and
tested as to whether it is realized of not
IMPACT OBJECTIVES IMPACT MEASUREMENT
Impact map Impact objectives KPI/
measure
Base-
line
Target Date Date Date Date Date
Business Impact:
Business Impact A
Business Impact B
Business Impact C
Behavioural Impact:
Behaviour Impact 1
Behaviour Impact 2
Behaviour Impact 3
Business/Performance
Behavior/Capability
<Behaviour impact 3>
<Behaviour
impact 1>
<Behaviour
impact 2>
<Business
impact A>
<Business
impact C>
<Overall impact>
<Business
impact B>

14. Value must be something which can be measured and
tested as to whether it is realized of not
IMPACT OBJECTIVES IMPACT MEASUREMENT
Impact map Impact objectives KPI/
measure
Base-
line
Target Date
1/1
Date
1/2
Date
1/3
Date
1/4
Date
1/5
Business Impact:
Timely project
completion
% of project
on time
67% 85% 65% 68% 69% 69% 70%
Project halts due to
missing resources
# of halts /
project
8,8 4 8,4 8,1 7,9 7,5 7,4
Reduce costs per trip € / trip 824€ 600€ 745€ 740€ 710€ 714€ 699€
Behavioural Impact:
Increased project
status meetings
# of meetings
per quarter
2,4 4 2,3 2,1 2,6 2,5 2,2
Use of contact
suppliers
% of
maverick
buying
36% 10% 21% 23% 19% 15% 14%
Increase ordering via
online solution
% of orders
online
0% 80% 20% 29% 42% 55% 58%
Business/Performance
Behavior/Capability
Increase ordering via online
solution
Project
status
meetings
Use of
contract
suppliers
Timely
project
completion
Reduce trip
costs
Reduce indirect project
costs
Project halts
Example – travel solution for project based
company

15. Choose the business value tool which makes the most
sense for you in working more with value in sourcing
CATEGORY PROFILING SOURCING STRATEGY SOURCING EXECUTION CATEGORY MANAGEMENT
Specifications
Use cases, map technical
specifications, quality and legal
requirements
1
Purpose
Mobilisation, scoping, set objec-
tive and savings target, identify
and evaluate effective sourcing
levers, make or buy decision
5
RFx design
Define evaluation criteria and
specifications, prepare RFx
material and define commercial
and contractual terms
9
Contract management
Establish change control,
implement contract,
implementation & communication
plan, implement TVO changes
13
Business value
Implications on value and supply
chain, create TVO model,
stakeholder identification, impact
on change activities
2
Capabilities
Internal capabilities, market scan
for external suppliers, need for
ext. competencies
6
Tendering
Launch strategy, Send out RFI,
RFP, RFQ and scoring model.
Manage supplier communication
10
P2P
Implementation of procure-to-pay
incl. catalogues, roles and
responsibilities, internal sales kit
and relations, compliance and
cost control
14
Spend pattern
Categorization, baseline definition
and forecasts, cost drivers, terms
and conditions
3
Strategizing
Outline 2-3 scenarios, incl. current
strategy, for future sourcing
model, internal + ext. assessment
of risks/benefits
7
Evaluation
Dialogue, quantitative supplier
response evaluation, short-list,
prepare negotiation
11
Value tracking
KPI monitoring and dialogue with
business to ensure “value for
money”
15
Market analysis
Segmented industry trends & best
practice, supply & demand levers,
competency benchmark, analyse
suppliers & contracts, reciprocity
analysis
4
Project plan
Detail preferred scenario,
activities, road map, resources
and time plan
8
Agreement
Conduct contractual and
commercial negotiations, award
and finalise contract, de-brief
suppliers
12
SRM
Collaborate with key suppliers to
maximize mutual value creation,
internal improvements, lessons
learned
16
PROCUREMENT
G1
Gate
G2
Gate
G3
Gate
G4
Gate
Strategy
Role in business, maturity and
development, budget and mandate
Organisation
Operating model, roles and
responsibilities, competencies
Processes
Interaction with requestors and
consumers, sourcing and procurement
model
Systems
Procurement set-up in ERP, Master
data, reporting, procurement tools
A B C D
Gate

16. However, securing the mandate to expand outside the cost
savings agenda is important to realizing impact
CATEGORY PROFILING SOURCING STRATEGY SOURCING EXECUTION CATEGORY MANAGEMENT
Specifications
Use cases, map technical
specifications, quality and legal
requirements
1
Purpose
Mobilisation, scoping, set objec-
tive and savings target, identify
and evaluate effective sourcing
levers, make or buy decision
5
RFx design
Define evaluation criteria and
specifications, prepare RFx
material and define commercial
and contractual terms
9
Contract management
Establish change control,
implement contract,
implementation & communication
plan, implement TVO changes
13
Business value
Implications on value and supply
chain, create TVO model,
stakeholder identification, impact
on change activities
2
Capabilities
Internal capabilities, market scan
for external suppliers, need for
ext. competencies
6
Tendering
Launch strategy, Send out RFI,
RFP, RFQ and scoring model.
Manage supplier communication
10
P2P
Implementation of procure-to-pay
incl. catalogues, roles and
responsibilities, internal sales kit
and relations, compliance and
cost control
14
Spend pattern
Categorization, baseline definition
and forecasts, cost drivers, terms
and conditions
3
Strategizing
Outline 2-3 scenarios, incl. current
strategy, for future sourcing
model, internal + ext. assessment
of risks/benefits
7
Evaluation
Dialogue, quantitative supplier
response evaluation, short-list,
prepare negotiation
11
Value tracking
KPI monitoring and dialogue with
business to ensure “value for
money”
15
Market analysis
Segmented industry trends & best
practice, supply & demand levers,
competency benchmark, analyse
suppliers & contracts, reciprocity
analysis
4
Project plan
Detail preferred scenario,
activities, road map, resources
and time plan
8
Agreement
Conduct contractual and
commercial negotiations, award
and finalise contract, de-brief
suppliers
12
SRM
Collaborate with key suppliers to
maximize mutual value creation,
internal improvements, lessons
learned
16
PROCUREMENT
G1
Gate
G2
Gate
G3
Gate
G4
Gate
Strategy
Role in business, maturity
and development, budget
and mandate
Organisation
Operating model, roles and
responsibilities, competencies
Processes
Interaction with requestors and
consumers, sourcing and procurement
model
Systems
Procurement set-up in ERP, Master
data, reporting, procurement tools
A B C D
Gate

17. Implement Consulting Group is in love with value based
sourcing and developed the Solution Buying® approach
What creates
value for us
How is
value
creation
ensured
Can
more
value be
created
What
creates
value for
them
Who can
deliver
the most
value
Gain detailed
understanding on how
the solution generates
value for our
organization and
customers
Solutions are bought
due to the value they
create
Understand how the
supplier creates the
solutions offered
Focus on the supplier,
not the market
Explore how more
value can be created
through both benefit
increase and cost
decrease
Let the suppliers and
stakeholders in
Follow the solution all
the way to
implementation
Value creation
happens when the
users apply the solution
Perform principled
negotiations with key
suppliers
Focus on enhancing
the pie, rather than
splitting it

18. Change with Impact.