2107 Key Success Factors for High-Performance Strategic ...


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  • This diagram displays the proposed DOT-wide Strategic Sourcing (DWSS) governance structure As you can see, the diagram indicates a proposed linkage to the Enterprise/IT Governance Structure via the ARB; however, the details of the coordination process have not yet been determined Although we will discuss the DWSS governance groups in more detail on the next page, I want to highlight a few key features of the governance structure: All areas within the governance structure with representation from the CIO organization have been highlighted In addition to the ARB linkage, the Deputy CIO will be a member of the Executive Steering Group and there will be OA CIO representation on the DOT Strategic Sourcing Board IT Commodity Councils are expected to continue to report to the ARB; however, we envision close coordination with the DSSB in order to share analytical and functional support resources, best practices, etc. across all commodity teams
  • 2107 Key Success Factors for High-Performance Strategic ...

    1. 2. Dr. Timothy M. Laseter Sr. Advisor, Censeo Consulting Group Operations Faculty Darden Graduate Business School University of Virginia High-Performing Strategic Sourcing Programs Breakout Session # 2107 April 24, 2007 Mr. Ash Bedi Director Censeo Consulting Group
    2. 3. What is Strategic Sourcing? DEFINED BY STRATEGIC SOURCING DEFINITIONS Strategic Sourcing Roundtable (Session 4, January 13, 2005) <ul><li>Strategic sourcing is NOT….an answer…it is NOT leveraged buying.. </li></ul><ul><li>Strategic Sourcing IS… </li></ul><ul><li>A PROCESS for systematically analyzing and developing optimal strategies for buying goods and services. </li></ul><ul><li>DATA DRIVEN – fact-based analysis to drive decision making rather than just “hunches” </li></ul><ul><li>HOLISTIC process that addresses customer needs, market conditions, organizational goals and objectives, and other environmental factors </li></ul><ul><li>Based on MARKET INTELLIGENCE and takes into account small business capabilities </li></ul><ul><li>Inclusive of CUSTOMER REQUIREMENTS </li></ul><ul><li>A CROSS-FUNCTIONAL APPROACH </li></ul><ul><li>About SUPPORTING AN ORGANIZATION’S MISSION through procured goods and services </li></ul><ul><li>About DEVELOPING ORGANIZATION WIDE STRATEGIES </li></ul>
    3. 4. Key Success Factors <ul><li>Five Key Success Factors for driving high performance strategic sourcing programs </li></ul><ul><ul><li>Governance & Leadership </li></ul></ul><ul><ul><li>Comprehensive sourcing approach </li></ul></ul><ul><ul><li>Analytical rigor </li></ul></ul><ul><ul><li>Resource mix </li></ul></ul><ul><ul><li>Ongoing Performance Management </li></ul></ul>Based on research and experience across many industries
    4. 5. Governance and Leadership <ul><li>Characteristics of Governance and Leadership prevalent in successful programs </li></ul><ul><ul><li>Multi-tiered structured with cross-functional and senior leadership involvement </li></ul></ul><ul><ul><ul><li>Senior leadership “champions” program and helps procurement/acquisition to develop credibility by outwardly supporting sourcing initiatives </li></ul></ul></ul><ul><ul><ul><li>Beyond senior leadership, multiple tiers of governance ensure appropriate level of oversight and involvement </li></ul></ul></ul><ul><ul><ul><li>Cross-functional involvement ensures “buy in” and ownership by key stakeholders </li></ul></ul></ul><ul><ul><li>Clearly defined decision making processes </li></ul></ul><ul><ul><ul><li>Well-defined and detailed decision making processes ensure key decisions are approved at appropriate levels so that can be enforced </li></ul></ul></ul><ul><ul><ul><li>Distributed decision making authority ensures both timely decisions and sense of control to appropriate levels </li></ul></ul></ul><ul><ul><li>Incentives and accountability </li></ul></ul><ul><ul><ul><li>Metrics and incentives are aligned to meet the needs of the program and relevant stakeholders </li></ul></ul></ul><ul><ul><ul><li>Accountability starts from the top and flows down to each level </li></ul></ul></ul>Source: Organizing for Effective Spend Management, Best Practices Study, March 2007 – Censeo Consulting Group, Inc. Copyright 2007.
    5. 6. Example of Governance Structure Operating Administrations/Modes STRATEGIC SOURCING PROGRAM GOVERNANCE STRUCTURE Executive Steering Group (ESG) Architecture Review Board (ARB) ENTERPRISE (IT) GOVERNANCE STRUCTURE Commodity Team OA participation dependent on nature of commodity Deputy CIO is a key member of this group Key linkage to CIO organization – Coordination process Needs to be defined Relevant OA CIOs as key members Representation from CIO organization ARB representative to participate Strategic Sourcing Directors Enterprise Commodity Teams Multi-divisional Commodity Teams Single OA Commodity Teams IT Commodity Councils
    6. 7. Comprehensive Sourcing Approach <ul><li>Comprehensive understanding of internal and external environment </li></ul><ul><ul><li>Internal (processes, costs, supplier relationships, demand) </li></ul></ul><ul><ul><li>External (market conditions, supply chain) </li></ul></ul><ul><li>Commodity strategy goes beyond supply relationships and contract structure </li></ul><ul><ul><li>“ Go to Market” approach </li></ul></ul><ul><ul><li>Internal levers including processes, policies and technologies to drive compliance and manage demand </li></ul></ul><ul><li>Continuous process of management </li></ul><ul><ul><li>Follow through on implementation (change management, communication) </li></ul></ul><ul><ul><li>Continually assess customer needs and markets </li></ul></ul><ul><ul><li>Focus on metrics and measurement to drive corrective action </li></ul></ul>
    7. 8. Example of Comprehensive Sourcing Approach SOURCING TACTICS OVERVIEW A comprehensive sourcing approach identifies all possible souring levers – supply, demand and process-related SOURCING TACTIC EXPLANATION IMPLEMENTA-TION HORIZON SUPPLY SIDE Competitive Bidding <ul><li>Select a set of small businesses to compete with each other for work through a task order multiple-award vehicle </li></ul>Near-term Volume Redistribution <ul><li>Award greater volume of work to suppliers based on performance. </li></ul>Intermediate-term Best Value/Price Analysis <ul><li>Institute a process whereby supplier business is adjusted based on closely monitored performance metrics. </li></ul>Intermediate-term PROCESS Process Standardization & Improvement <ul><li>Consider the use of an automated tool (accessible by end users and COs) as an ordering portal with pre-defined rules for ordering, and contract & supplier selection. </li></ul>Long-term Collaborative Cost Reduction Opportunities <ul><li>Work jointly with suppliers to explore cost reduction opportunities and to identify suppliers that are more efficient at meeting DoD needs. </li></ul><ul><li>Utilize the degree of supplier participation in this area as part of overall supplier performance assessment. </li></ul>Intermediate-term DEMAND SIDE Labor Category Accuracy <ul><li>End User involvement in the ordering process should be expanded to include participation in the selection of skill level alternatives (prior to proposal creation) to assist in the accuracy of skill levels selected and enabling end-users to make trade-offs in cost versus skill level. </li></ul>Near- term
    8. 9. Analytic Rigor <ul><li>Data and factual analysis drive overall approach and strategy, in combination with experiential knowledge </li></ul><ul><li>Understanding costs is a key component of a fact-based analysis </li></ul><ul><ul><li>Total Cost Analysis helps identify key cost elements and drivers </li></ul></ul><ul><ul><li>Industry cost structure analysis leads to identification opportunities for collaboration and negotiation leverage </li></ul></ul><ul><li>Comprehensive understanding of markets, beyond identification of suppliers, is key to developing an approach that optimizes costs across buyer and supplier </li></ul>
    9. 10. Example of Analytic Rigor This example shows how an analysis of the cost components of employee relocation reveals the two major cost areas – real estate and household goods transportation The analysis serves to focus the sourcing effort on areas where there is likely greatest benefit
    10. 11. Example of Analytic Rigor This example shows how understanding the macro-level prospects of an industry (unit growth) can be used to better understand the imperatives of individual suppliers
    11. 12. Resource Mix <ul><li>Resource mix is dependent on the size and scope of effort, but some key considerations include: </li></ul><ul><ul><li>Level of Resources </li></ul></ul><ul><ul><ul><li>Senior leadership to endorse and “champion” </li></ul></ul></ul><ul><ul><ul><li>Other levels with knowledge and expertise in subject matter </li></ul></ul></ul><ul><ul><li>Dedicated versus Ad-hoc Resources </li></ul></ul><ul><ul><ul><li>Typically some of level of dedicated resources are required </li></ul></ul></ul><ul><ul><ul><li>Outreach to key stakeholders and SMEs </li></ul></ul></ul><ul><ul><li>Cross-functional versus procurement </li></ul></ul><ul><ul><ul><li>Procurement is typically the common link across all initiatives, whether leading or supporting </li></ul></ul></ul><ul><ul><ul><li>“ Customers” typically run initiatives where they have clear ownership </li></ul></ul></ul><ul><ul><ul><li>Areas where there is no clear ownership are handled by procurement </li></ul></ul></ul>
    12. 13. Example of Resource Mix – Government Client Commodity Team Executive Sponsor Program/Analytical Support Customer/Functional Reps Procurement <ul><li>Requirements Analysis </li></ul><ul><li>Data Analysis </li></ul><ul><li>Market Analysis </li></ul><ul><li>Procurement Policy Analysis </li></ul><ul><li>Change Management </li></ul>Commodity Team Lead Small Business – Small Business Specialists Stakeholders - Internal and External to Govt Experts - Subject Matter Experts and Advisors Industry - Associations and Suppliers <ul><li>Functional Managers </li></ul><ul><li>Program Managers </li></ul><ul><li>Contracting Officer </li></ul><ul><li>Contract Specialist </li></ul>Typically Full-Time Roles Part-Time Roles Full-Time During Step 4 Legend: Commodity Team Structure
    13. 14. Ongoing Performance Management
    14. 15. Example of Ongoing Performance Management (Objectives & Metrics) OFFICE SUPPLIES COMMODITY MANAGEMENT PLAN OBJECTIVES & PERFORMANCE METRICS Ongoing commodity & performance management addresses supplier performance, internal performance, and benefits measurement Plan Component Overall Objectives Performance Metrics Supplier Performance Management <ul><li>Monitor supplier performance against agreed to contractual terms and provide timely feedback to drive performance improvements </li></ul><ul><li>Order acknowledge time </li></ul><ul><li>Order to ship time </li></ul><ul><li>Order shipment notification </li></ul><ul><li>Order to delivery time </li></ul><ul><li>Out of stock notification prior to shipment </li></ul><ul><li>Monthly performance metrics reporting (as per RFQ) </li></ul><ul><li>Monthly usage reporting (as per RFQ) </li></ul>Internal Performance Management <ul><li>Take proactive actions to meet the needs of the user community and drive usage of new supply arrangements </li></ul><ul><li>Total year-to-date spend with new supply arrangement(s) </li></ul><ul><li># of agencies utilizing new supply arrangements </li></ul><ul><li>% agency spend thru new supply arrangements </li></ul><ul><li>User satisfaction with new supply arrangements </li></ul>Benefits Tracking & Reporting <ul><li>Track estimated savings from use of new supply arrangements </li></ul><ul><li>Estimated realized cumulative savings (based on spend with new supply arrangement(s) and agency level price baseline) </li></ul>
    15. 16. Questions? Please send request by email to get a copy of the Censeo Best Practices Study “Organizing for Spend Management” <ul><li>Contact Info </li></ul>Dr. Timothy M. Laseter [email_address] OR [email_address] (434) 924-4078 Mr. Ash Bedi [email_address] (425) 894-8285
    16. 17. Censeo Consulting Group Corporate Summary <ul><li>Censeo Consulting Group helps organizations create maximum efficiencies throughout their supply chain by structuring optimal supply relationships based on a deep understanding of internal needs and supply markets. </li></ul><ul><li>Censeo at a Glance </li></ul><ul><li>Focus in supply chain and procurement – not a “general management” consulting firm - all facets of company including people, resources, intellectual capital built to provide supply chain and procurement consulting </li></ul><ul><li>Serving Fortune 100 commercial clients and Federal government clients worldwide … </li></ul><ul><li>Staff with deep expertise in supply chain, sourcing and procurement </li></ul><ul><li>Most staff from previous experience from large, prestigious consulting firms such as A.T. Kearney, and Booz Allen Hamilton </li></ul><ul><li>Lean cost structure with low overhead in order to provide strategy consulting services at extremely competitive rates </li></ul><ul><li>Strategic partnerships to deliver full life-cycle services </li></ul>Censeo Clients Include
    17. 18. Censeo’s sourcing and procurement expertise aligns with three core capability areas: Consulting, Training & Research <ul><li>Supply Chain Strategy </li></ul><ul><li>Commodity Sourcing Strategies </li></ul><ul><li>Commodity Lifecycle Management </li></ul><ul><li>Sourcing Organization Design & Governance </li></ul><ul><li>Strategic Sourcing Program Management </li></ul><ul><li>Strategic Sourcing Learning Lab </li></ul><ul><li>Custom Training Programs </li></ul><ul><li>Online Strategic Sourcing Courses </li></ul><ul><li>Commodity Market Intelligence </li></ul><ul><li>Supplier Discovery, Evaluation & Selection </li></ul><ul><li>Strategic Sourcing Benchmarking </li></ul><ul><li>Spend Analysis </li></ul><ul><li>eSourcing </li></ul><ul><li>Supplier & Sourcing Performance Management </li></ul><ul><li>Demand Management </li></ul><ul><li>Small Business / Supplier Diversity Strategies </li></ul><ul><li>Offshoring / Outsourcing </li></ul>