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Procurement Strategy Framework

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Strategic sourcing will allow an organization to realize significant savings. This document details a 4-phase framework to Procurement Strategy, outlining time frames, activities, and outputs.

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Procurement Strategy Framework

  1. 1. PowerPoint Diagram Pack Procurement Strategy Framework Strategic sourcing will allow an organization to realize significant savings. This document details a 4-phase framework to Procurement Strategy, outlining time frames, activities, and outputs. <ul><li>Check out our site for all your PowerPoint needs! </li></ul><ul><li>http://learnppt.com – Find our ebook on creating effective and professional presentations. Covers basic to advanced concepts, including storyboarding, diagramming, and the Consulting Presentation Framework. </li></ul><ul><li>http://learnppt.com/powerpoint -- Shop our catalog of Diagram Packs. We try to add more Packs monthly. All of our diagrams are professionally designed by ex-management consultants from top firms. </li></ul>Assessment Snapshot Spend Analysis Category Sourcing Implement- ation 1 2 3 4
  2. 2. Savings Time <ul><li>Final implementation of strategies </li></ul><ul><li>Secure potential and sustainability over time, by continuously addressing: </li></ul><ul><ul><li>Procurement Processes </li></ul></ul><ul><ul><li>Procurement organization </li></ul></ul><ul><ul><li>IT infrastructure </li></ul></ul><ul><li>Development of commodity strategies </li></ul><ul><li>Start implementation activities, quotations </li></ul><ul><li>Start delivering on the business case potential </li></ul><ul><li>Volume Analysis </li></ul><ul><li>Procurement Behavior Analysis </li></ul><ul><li>Potential & Business Case </li></ul>Potential ” Find the money” ” Deliver the savings” ” Keep and identify new savings” Strategies, processes, organization and IT infrastructure is crucial to realize, sustain and develop the potential over time Overview – Savings through Time Through Procurement Strategy, an organization can realize significant savings over time THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
  3. 3. Savings Opportunities Low High Low High BUSINESS IMPACT SUPPLY MARKET CHALLENGE <ul><li>Considerations </li></ul><ul><li>% of Expenditure </li></ul><ul><li>Relationship to strategic imperative </li></ul><ul><li>Time sensitivity </li></ul><ul><li>Considerations </li></ul><ul><li>Product substitution </li></ul><ul><li>Number of sourcing options </li></ul><ul><li>Buyer leverage/power </li></ul>Savings Opportunities through Procurement fall into 4 distinct buckets—dependent on business impact and supplier situation THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ <ul><li>LEVERAGE </li></ul><ul><li>Very complex specifications requiring complex manufacturing or service process </li></ul><ul><li>Few alternate products available </li></ul><ul><li>Few qualified sources of supply </li></ul><ul><li>May have a big impact on ongoing operations or maintenance </li></ul><ul><li>New technology or untested processes involved in provisioning of the product of service </li></ul><ul><li>ROUTINE </li></ul><ul><li>Many existing alternate products and services </li></ul><ul><li>Many sources </li></ul><ul><li>Low value </li></ul><ul><li>Small individual transactions </li></ul><ul><li>“ Anyone” could buy it </li></ul><ul><li>Unspecified items for everyday use </li></ul><ul><li>STRATEGIC </li></ul><ul><li>Strategic to profitability and operations </li></ul><ul><li>Few qualified supply sources </li></ul><ul><li>Large expenditures </li></ul><ul><li>Design to quality critical </li></ul><ul><li>Complex specifications </li></ul><ul><li>LEVERAGE </li></ul><ul><li>High-expenditure area </li></ul><ul><li>Many existing alternate products and services </li></ul><ul><li>Many qualified supply sources </li></ul><ul><li>Goods and services are readily available </li></ul>
  4. 4. Procurement Strategy – Approach Assessment Snapshot Spend Analysis Category Sourcing Implementation 1 2 3 4 KEY ACTIVITIES The Procurement Strategy outlined in this document follows a 4-phase approach THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ <ul><li>Manage relationships with suppliers </li></ul><ul><li>Track spend and savings against projections </li></ul><ul><li>Enforce buying compliance across organization and with suppliers </li></ul><ul><li>Define user requirements </li></ul><ul><li>Develop a Procurement/Buy Strategy </li></ul><ul><li>Select suppliers </li></ul><ul><li>Negotiate LOU </li></ul><ul><li>Implement plan </li></ul><ul><li>Gather, clean, and validate spend data </li></ul><ul><li>Develop and load spend data into analysis tools (e.g. database cube, Excel spreadsheet) </li></ul><ul><li>Review and analyze data </li></ul><ul><li>Generate savings estimates </li></ul><ul><li>Kick-off the project </li></ul><ul><li>Determine primary sources of data and assess their qualities </li></ul><ul><li>Create a snapshot of spend across spend categories and organization (e.g. by business divisions) </li></ul><ul><li>Develop a high-level sourcing plan </li></ul>
  5. 5. The assessment snapshot allows development of a fine tuned plan to achieve sourcing objectives. Assessment Snapshot – Overview Assessment Snapshot Initiate Project Spend Analysis Market Analysis Strategy Development Spend Analysis Category Sourcing Implementation 1 2 3 4 In the initial Assessment Snapshot phase, the organization’s spend is assessed to determine the potential savings benefit … THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
  6. 6. ACTIVITIES PRIMARY OUTPUTS … And, at the close of this phase, we will have a prioritized list of opportunities based on speed to value and organizational need Assessment Snapshot – Activities & Deliverables THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ Assessment Snapshot Spend Analysis Category Sourcing Implement- ation 1 2 3 4 Initiate Project Spend Analysis Market Analysis Strategy Development <ul><li>Prioritized list of opportunities based on speed to value and organizational need </li></ul><ul><li>High level time line and effort for implementation </li></ul><ul><li>Category list with high level range and size of opportunities </li></ul><ul><li>High level organization development and process re-design opportunities </li></ul><ul><li>Spend analysis output (e.g. spend breakdown by category, by business unit, by supplier, by product) </li></ul><ul><li>Estimate size and ease of implementation for each sourcing opportunity </li></ul><ul><li>Prioritize process and systems opportunities with respect to organizational need </li></ul><ul><li>Develop high level recommendations for organization to adopt leading practices </li></ul><ul><li>Document approach </li></ul><ul><li>Investigate sourcing maturity through interviews </li></ul><ul><ul><li>Organization capacity and capability issues </li></ul></ul><ul><ul><li>Processes and compliance controls </li></ul></ul><ul><ul><li>Systems/tools in use </li></ul></ul><ul><ul><li>High level contract review for opportunities </li></ul></ul><ul><li>Review of current sourcing initiatives and recent wins </li></ul><ul><li>Collate macro-level Spend Data and validate for accuracy </li></ul><ul><li>Investigate data sources: </li></ul><ul><ul><li>Volume </li></ul></ul><ul><ul><li>Quality </li></ul></ul><ul><ul><li>Level of Detail </li></ul></ul><ul><ul><li>Coverage of total spend within organization </li></ul></ul><ul><li>Estimate time for full spend analysis (within scope) </li></ul><ul><li>Mobilize Team </li></ul><ul><li>Request sample or macro-level data around: </li></ul><ul><ul><li>Spend </li></ul></ul><ul><ul><li>Contracts </li></ul></ul><ul><ul><li>Related initiatives </li></ul></ul><ul><ul><li>Process flows </li></ul></ul><ul><li>Identify key stakeholders and schedule Interviews </li></ul>
  7. 7. The Assessment Snapshot phase assesses 4 primary area Ease of Implementation of Sourcing Opportunities Size of Opportunities Capacity / Staffing Assessment Organizational Capabilities <ul><li>Assessed through stakeholder interviews to understand level of sophistication and depth of initiatives completed in the past </li></ul><ul><li>Assessed through macro-level spend analysis </li></ul><ul><li>Utilize benchmarks where available—however, ensure benchmarks are comparing “apples to apples” </li></ul><ul><li>Assessed using results of macro-level spend analysis, transaction volumes, and complexity of product category </li></ul><ul><li>Utilize subject matter experts opinions on product category </li></ul><ul><li>Assessed through stakeholder interviews </li></ul><ul><li>Capabilities to evaluate include processes for sourcing, procurement, and compliance; systems/tools enabling the procurement processes; and skill levels within the organization </li></ul>Performing these initial assessments upfront will optimize speed to value. Assessment Snapshot – Primary Assessments THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ Assessment Snapshot Spend Analysis Category Sourcing Implement- ation 1 2 3 4
  8. 8. Assessment Snapshot Spend Analysis Category Sourcing Implementation 1 2 3 4 Source Data Clean and Validate Data Develop Spend Data Analysis Tool Review and Analyze Data Generate Savings Estimate In most organizations, this phase requires the help of IT to extract spend data from ERP and other systems. Spend Analysis – Overview The Spend Analysis phase requires significant data analysis, requiring the development of a Spend Analysis Tool (typically in Access) THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
  9. 9. Spend Analysis involves 5 phases, ending with the estimation of projected savings Approach – Phase 2 Spend Analysis ACTIVITIES PRIMARY OUTPUTS THIS IS A PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/ Assessment Snapshot Spend Analysis Category Sourcing Implement- ation 1 2 3 4 Source Data Clean and Validate Data Develop Spend Data Analysis Tool Review and Analyze Data Generate Savings Estimate <ul><li>Spend scenario outputs </li></ul><ul><li>Develop and run scenarios using Spend Analysis Tool </li></ul><ul><li>Conduct interviews to review outputs and validate observations </li></ul><ul><li>Validate with existing contracts and metrics </li></ul><ul><li>Savings estimate projections over specified timeframe (e.g. 2-years) </li></ul><ul><li>Data Analysis Tool </li></ul><ul><li>Cleansed spend data </li></ul><ul><li>Mapping of coding hierarchy </li></ul><ul><li>Spreadsheets of raw spend data </li></ul><ul><li>Continue to validate analyses </li></ul><ul><li>Generate detailed savings estimates </li></ul><ul><li>Select a tool to conduct Spend Analysis and develop it </li></ul><ul><li>Tool selection dependent on quantity of spend data: </li></ul><ul><ul><li>e.g. Excel for small data sets, Data warehouse for large data sets </li></ul></ul><ul><li>Load spend data </li></ul><ul><li>Clean source data </li></ul><ul><ul><li>Remove duplicates </li></ul></ul><ul><ul><li>Re-categorize “other” spend category </li></ul></ul><ul><li>Map GL codes to coding hierarchy for spend analysis tool </li></ul><ul><li>Leading practice to use standard categorization (e.g. DUNS, gov’t db) </li></ul><ul><li>Determine data sources and collect data </li></ul><ul><li>Potential data sources: </li></ul><ul><ul><li>Financial ERP (AP, GL modules) </li></ul></ul><ul><ul><li>P-Card </li></ul></ul><ul><ul><li>Cash disbursements </li></ul></ul><ul><ul><li>Existing suppliers (a last resort) </li></ul></ul>
  10. 10. END OF PARTIAL PREVIEW You can preview the full PowerPoint document and download it at http://learnppt.com/powerpoint/
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