Amidst growing pressure to streamline business processes and enhance operational performance, complete or incremental optimization across the sourcing life-cycle has become the need of the hour.
The document discusses procurement strategy and outlines several key points:
1. It addresses challenges with accurately measuring costs and potential issues like human error or distortion.
2. It examines common strategic planning tools and issues they may have in fully representing an organization.
3. It outlines the structure of an effective procurement strategy, including defining the mission, strategic outcomes, and ensuring alignment with the overall organizational strategy.
The document discusses implementing lean six sigma principles and eProcurement/strategic sourcing in a heavy machinery industry's MRO environment. It outlines the implementation highlights, including a focus on change management over technology. Benefits achieved included reduced costs, improved compliance, and faster processing times. The strategic sourcing roadmap included spend analysis, supplier evaluation, contracting, and an eProcurement system to streamline the procure-to-pay process. Key success factors included cross-functional involvement, standardization, and benefits realization monitoring.
The document discusses strategic sourcing and ADMA-OPCO's plans to implement it. The goals of strategic sourcing are to increase customer satisfaction, improve internal service levels and product quality, and significantly reduce total costs through coordinated purchasing across the organization. ADMA-OPCO aims to leverage its buying power to obtain goods and services efficiently for end users. The document outlines the strategic sourcing process and opportunities for ADMA-OPCO to analyze spending, the supplier base, and develop a sourcing strategy to better meet its goals.
The document discusses supplier relationship management as a key process in supply chain management. It defines supply chain management as integrating business processes from suppliers to end customers to add value. It describes supplier relationship management as providing the structure for developing and maintaining relationships with suppliers, including performance agreements to balance the needs of both parties. The goal is to improve customer service, costs, and profits through collaborative relationships rather than transactional interactions.
The document discusses strategies for managing strategic supplier relationships and collaboration. It outlines key questions purchasing officers should consider around understanding their supply base and spend. It then covers the strategic sourcing process, including analyzing spend, identifying requirements, analyzing the market, developing a strategy, managing negotiations, awarding contracts, and implementing the strategy. It also discusses optimizing the supplier base, performing supplier financial analysis, managing risk, and improving supplier performance.
1. Strategic sourcing is a continuous process that involves discovering, prioritizing, improving, and re-evaluating sourcing activities to achieve cost savings and meet business needs.
2. The document outlines a 9-step process for strategic sourcing, beginning with internal research to analyze company spend data, categorize spending, evaluate risks, select project scope, and conduct spend, cost structure, and total cost of ownership analyses.
3. The first step of internal research lays the groundwork for subsequent steps by gathering and analyzing internal company data to understand spending patterns and costs. This information is then used to inform strategic sourcing decisions.
The document discusses strategies for developing model suppliers and optimizing a company's supply base. It defines attributes of model suppliers, such as managing quality systems, demonstrating technology leadership, and supporting business goals. It also outlines steps for a mature supply management process, including defining a preferred supplier base, establishing strategic partnerships, integrating suppliers, and conducting supply base segmentation. Commodity source plans are developed annually based on supplier performance data and input from stakeholders to guide one-year and three-to-five-year sourcing strategies.
The document discusses procurement strategy and outlines several key points:
1. It addresses challenges with accurately measuring costs and potential issues like human error or distortion.
2. It examines common strategic planning tools and issues they may have in fully representing an organization.
3. It outlines the structure of an effective procurement strategy, including defining the mission, strategic outcomes, and ensuring alignment with the overall organizational strategy.
The document discusses implementing lean six sigma principles and eProcurement/strategic sourcing in a heavy machinery industry's MRO environment. It outlines the implementation highlights, including a focus on change management over technology. Benefits achieved included reduced costs, improved compliance, and faster processing times. The strategic sourcing roadmap included spend analysis, supplier evaluation, contracting, and an eProcurement system to streamline the procure-to-pay process. Key success factors included cross-functional involvement, standardization, and benefits realization monitoring.
The document discusses strategic sourcing and ADMA-OPCO's plans to implement it. The goals of strategic sourcing are to increase customer satisfaction, improve internal service levels and product quality, and significantly reduce total costs through coordinated purchasing across the organization. ADMA-OPCO aims to leverage its buying power to obtain goods and services efficiently for end users. The document outlines the strategic sourcing process and opportunities for ADMA-OPCO to analyze spending, the supplier base, and develop a sourcing strategy to better meet its goals.
The document discusses supplier relationship management as a key process in supply chain management. It defines supply chain management as integrating business processes from suppliers to end customers to add value. It describes supplier relationship management as providing the structure for developing and maintaining relationships with suppliers, including performance agreements to balance the needs of both parties. The goal is to improve customer service, costs, and profits through collaborative relationships rather than transactional interactions.
The document discusses strategies for managing strategic supplier relationships and collaboration. It outlines key questions purchasing officers should consider around understanding their supply base and spend. It then covers the strategic sourcing process, including analyzing spend, identifying requirements, analyzing the market, developing a strategy, managing negotiations, awarding contracts, and implementing the strategy. It also discusses optimizing the supplier base, performing supplier financial analysis, managing risk, and improving supplier performance.
1. Strategic sourcing is a continuous process that involves discovering, prioritizing, improving, and re-evaluating sourcing activities to achieve cost savings and meet business needs.
2. The document outlines a 9-step process for strategic sourcing, beginning with internal research to analyze company spend data, categorize spending, evaluate risks, select project scope, and conduct spend, cost structure, and total cost of ownership analyses.
3. The first step of internal research lays the groundwork for subsequent steps by gathering and analyzing internal company data to understand spending patterns and costs. This information is then used to inform strategic sourcing decisions.
The document discusses strategies for developing model suppliers and optimizing a company's supply base. It defines attributes of model suppliers, such as managing quality systems, demonstrating technology leadership, and supporting business goals. It also outlines steps for a mature supply management process, including defining a preferred supplier base, establishing strategic partnerships, integrating suppliers, and conducting supply base segmentation. Commodity source plans are developed annually based on supplier performance data and input from stakeholders to guide one-year and three-to-five-year sourcing strategies.
The document provides an overview of procurement risk management. It discusses the basic approach to risk management including identifying risk areas, avoidance, reduction, sharing and mitigation. It also covers supplier risk events, taking an integrated view of risk across the supply chain, and the benefits of risk management services. The document outlines the key steps in a procurement risk management program and challenges to establishing such a program. It provides recommendations on mitigating supplier risk and protecting the supply chain.
Procure to Pay Transformation.
--
Presentation originally made at the SMART Supply Chain Conference, June 2013. This transformation won the Award for Procurement Excellence.
The presentation is Copyright protected and is for information purposes only and may not be reproduced in any form without written permission of authors.
This document outlines a case study for implementing a metrics-driven vendor management services (VMS) framework. It begins with defining vendor management and outlining goals like reducing costs and risks. It then analyzes existing sourcing systems, data, technologies, and processes. Key sections describe the designed VMS metrics framework, including relationship, operational, financial, and satisfaction scorecards. The framework provides metrics in a customizable dashboard. Results included consolidated scorecards and drilldowns. Lessons learned stress understanding information hierarchies and ensuring quality assurance during implementation.
The document discusses supplier selection and evaluation. It defines supplier selection and outlines a 7 step process for evaluating and selecting suppliers, including recognizing the need, identifying requirements, determining strategy, identifying potential suppliers, limiting the pool, evaluating, and selecting. It also discusses using Carter's 10 C's model to evaluate suppliers based on competency, capacity, consistency, cost and other factors. An example application of the process is provided where 4 potential suppliers are evaluated against the 10 C's and weighted factors to determine the best option.
Strategic Role of Purchasing
Purchasing Portfolio
Supplier Selection
Customer Centric Supply Chain
Supply Chain Management
Supply Chain Management in the 21st Century
Research Topics in Supply Chain Management
Digital Supply Chain Management - Supply Chain 4.0 - Supply Chain Management ...Danar Mustafa
This document discusses supply chain 4.0 and the key implications of digital technologies in supply chain management. It defines key terms like digitization and digital transformation. It outlines the industrial revolutions and driving technologies of industry 4.0 like the internet of things, cloud computing, and big data analytics. It also discusses how digitalization can unlock value and benefits through mass customization, automation, and leveraging big data. Finally, it provides examples of how new digital technologies are transforming supply chain management.
This document outlines the vendor management process from initial setup of a vendor database to ongoing evaluation and termination if needed. It involves researching potential vendors, getting quotes, evaluating vendors based on questionnaires and audits, selecting a vendor, creating contracts, ongoing performance reviews, and procedures for termination.
This document discusses supply chain management (SCM) best practices. It provides an overview of SCM, including key objectives and challenges. SCM integration can provide benefits like increased visibility, cost reductions, and improved service levels. The document also outlines next generation SCM solutions, how to measure SCM success, and how small and medium enterprises can adopt SCM practices. It concludes with an explanation of the Supply Chain Operations Reference model (SCOR) framework.
Preventing and Managing Supply Chain DisruptionsThomas Tanel
Supply chains worldwide have been battling various risks and challenges for some time. Each challenge not only threatens to disrupt operations, but also may have a negative financial impact on business performance and prevent an organization from meeting the demands from stakeholders, customers, shareholders, and regulators.
Supply Chain Council members have reported that less than half of enterprises have established metrics and procedures for assessing and managing supply risks and organizations lack sufficient market intelligence, process, and information systems to effectively predict and mitigate supply chain risks. Does this sound like your organization?
f so, supply chain disruptions can be extremely costly. A disruption in your supply chain can cost millions of dollars in lost time, energy and resources. Their effects are both direct (e.g. halting production altogether) and indirect (e.g. on stock values). Taking steps to help reduce supply chain disruption is the only way to avoid these costs.
Proactive discovery and visibility of risks is the key to the prevention and management of supply chain disruptions.
This document provides an overview of sales and operations planning (S&OP). S&OP is a collaborative planning process that aligns all business functions to a single plan to meet market demand profitably. It differs from traditional functional planning approaches by taking a holistic view of demand, supply, and financial plans. The S&OP process involves gathering data, demand planning, supply planning, pre-meetings, and executive meetings to align plans and resolve issues. Critical success factors include top management involvement, structured meetings, cross-functional participation, and integrated planning technology. Benefits include improved profitability, inventory management, and communication across business functions.
The document discusses how supply chain management is being transformed by Supply Chain 4.0 through the application of technologies like the Internet of Things, advanced robotics, and big data analytics. Supply Chain 4.0 will make supply chains faster, more flexible, more granular, and more accurate by placing sensors everywhere, creating networks, automating processes, and analyzing all available data. This will significantly improve performance and customer satisfaction. The document outlines several ways key areas like planning, physical flow, performance management, and order management will be improved through applications of emerging digital technologies.
The document discusses the major impact of digital technologies on supply chain management. It notes that industries now deal with real-time data exchange and storage, and rapidly changing customer behavior due to information availability. This has shifted companies from "doing digital" to "being digital" as a top priority. The advent of technologies like the Internet of Things, artificial intelligence, 3D printing and others are disrupting traditional supply chain models. The document introduces the concept of a digital supply chain that uses these technologies to improve business processes and provide value to all stakeholders. It outlines some of the key benefits of digital supply chains, as well as potential disruptions across different supply chain activities from sourcing to delivery. Finally, it maps the landscape and
Procurement and sourcing involve finding suppliers and negotiating contracts to obtain goods and services for a business. There are various types of procurement like direct, indirect, and service procurement. The procurement process identifies steps to acquire necessary goods and services in a cost-effective way. Strategic procurement aims to choose suppliers that match business goals, procuring higher quality items while managing supply chain risk. Sourcing is the process of selecting suppliers to provide quality products at affordable prices through activities like market research, establishing standards, and negotiating contracts. It allows for cost management, stable supply chains, and reduced risk through strong supplier relationships.
The strategic sourcing process involves identifying a company's current category usage, conducting a supplier and market analysis, selecting an appropriate sourcing strategy, and choosing a sourcing method. Key steps include developing requests for information and proposals, evaluating responses, negotiating with suppliers, integrating new suppliers, and monitoring market performance and supplier relationships on an ongoing basis. The process aims to identify all viable suppliers, execute the best sourcing approach, conduct negotiations to select suppliers, and operationalize agreements while monitoring the category.
This document discusses improving supply chain performance by linking it to the balanced scorecard. It outlines current supply chain measures and perspectives in the balanced scorecard. It then proposes linking the two by identifying performance measures that align the internal, financial, innovation/learning, and customer perspectives of the balanced scorecard with goals like unit cost reduction, time reduction, waste reduction, and flexible response in the supply chain. Aligning key performance indicators across these perspectives can help optimize supply chain performance.
Purchasing and procurement in Material managementKaustubh Vartak
Purchasing is a subset of procurement. Purchasing generally refers simply to buying goods or services. Purchasing often includes receiving and payment as well.
This document discusses supply chain planning and scheduling. It begins by defining a supply chain and outlining the objectives of supply chain management. It then describes the three decision phases of supply chain management: supply chain strategy/design, supply chain planning, and supply chain operations. Finally, it discusses the process view of supply chains using the cycle view and push/pull view and analyzes value within a supply chain.
This document provides information and guidance about establishing a vendor management office (VMO). It discusses designing the roles and responsibilities of the VMO, including job descriptions for contract administrators, vendor analysts, and vendor auditors. It also covers selecting a vendor management database, implementing vendor management policies and procedures, and ongoing vendor relationship management tasks. The overall aim is to help organizations effectively oversee vendor relationships and gain value through a centralized vendor management function.
Achieving Excellence in End-to-End Supply Managementmubarak2009
The document discusses challenges in supply chain management for service organizations. It notes a lack of integrated processes, tools, and information across supply chains. Common issues include no single contract repository, manual contract development, and an inability to match invoices to contracts. The presentation argues that effective contract management, using standardized templates and automation, can help address these issues and drive efficiencies across sourcing, procurement, and supplier management.
The document discusses strategic sourcing and ADMA-OPCO's plans to implement it. The goals of strategic sourcing are to increase customer satisfaction, improve internal service levels and product quality, and significantly reduce total costs through coordinated purchasing across the organization. ADMA-OPCO aims to leverage its buying power to obtain goods and services efficiently for end users. The document outlines the strategic sourcing process and opportunities for ADMA-OPCO to analyze spending, the supply base, develop a sourcing strategy, manage negotiations, award contracts, and implement the strategy.
This lecture slide was prepared for my guest lecture session in Bina Nusantara University's undergraduate program of International Business Management. It discussed the role of procurement function in an organisation, and how the function has been continuously evolved to meet market expectation by engaging business partners, as well as intra-company stakeholders. It shares top tips of how buyer can create value-add to the business from the book “Value-Added Purchasing” written by Eberhard E. Schening, PhD. Enjoy this as a part of your learning journey!
The document provides an overview of procurement risk management. It discusses the basic approach to risk management including identifying risk areas, avoidance, reduction, sharing and mitigation. It also covers supplier risk events, taking an integrated view of risk across the supply chain, and the benefits of risk management services. The document outlines the key steps in a procurement risk management program and challenges to establishing such a program. It provides recommendations on mitigating supplier risk and protecting the supply chain.
Procure to Pay Transformation.
--
Presentation originally made at the SMART Supply Chain Conference, June 2013. This transformation won the Award for Procurement Excellence.
The presentation is Copyright protected and is for information purposes only and may not be reproduced in any form without written permission of authors.
This document outlines a case study for implementing a metrics-driven vendor management services (VMS) framework. It begins with defining vendor management and outlining goals like reducing costs and risks. It then analyzes existing sourcing systems, data, technologies, and processes. Key sections describe the designed VMS metrics framework, including relationship, operational, financial, and satisfaction scorecards. The framework provides metrics in a customizable dashboard. Results included consolidated scorecards and drilldowns. Lessons learned stress understanding information hierarchies and ensuring quality assurance during implementation.
The document discusses supplier selection and evaluation. It defines supplier selection and outlines a 7 step process for evaluating and selecting suppliers, including recognizing the need, identifying requirements, determining strategy, identifying potential suppliers, limiting the pool, evaluating, and selecting. It also discusses using Carter's 10 C's model to evaluate suppliers based on competency, capacity, consistency, cost and other factors. An example application of the process is provided where 4 potential suppliers are evaluated against the 10 C's and weighted factors to determine the best option.
Strategic Role of Purchasing
Purchasing Portfolio
Supplier Selection
Customer Centric Supply Chain
Supply Chain Management
Supply Chain Management in the 21st Century
Research Topics in Supply Chain Management
Digital Supply Chain Management - Supply Chain 4.0 - Supply Chain Management ...Danar Mustafa
This document discusses supply chain 4.0 and the key implications of digital technologies in supply chain management. It defines key terms like digitization and digital transformation. It outlines the industrial revolutions and driving technologies of industry 4.0 like the internet of things, cloud computing, and big data analytics. It also discusses how digitalization can unlock value and benefits through mass customization, automation, and leveraging big data. Finally, it provides examples of how new digital technologies are transforming supply chain management.
This document outlines the vendor management process from initial setup of a vendor database to ongoing evaluation and termination if needed. It involves researching potential vendors, getting quotes, evaluating vendors based on questionnaires and audits, selecting a vendor, creating contracts, ongoing performance reviews, and procedures for termination.
This document discusses supply chain management (SCM) best practices. It provides an overview of SCM, including key objectives and challenges. SCM integration can provide benefits like increased visibility, cost reductions, and improved service levels. The document also outlines next generation SCM solutions, how to measure SCM success, and how small and medium enterprises can adopt SCM practices. It concludes with an explanation of the Supply Chain Operations Reference model (SCOR) framework.
Preventing and Managing Supply Chain DisruptionsThomas Tanel
Supply chains worldwide have been battling various risks and challenges for some time. Each challenge not only threatens to disrupt operations, but also may have a negative financial impact on business performance and prevent an organization from meeting the demands from stakeholders, customers, shareholders, and regulators.
Supply Chain Council members have reported that less than half of enterprises have established metrics and procedures for assessing and managing supply risks and organizations lack sufficient market intelligence, process, and information systems to effectively predict and mitigate supply chain risks. Does this sound like your organization?
f so, supply chain disruptions can be extremely costly. A disruption in your supply chain can cost millions of dollars in lost time, energy and resources. Their effects are both direct (e.g. halting production altogether) and indirect (e.g. on stock values). Taking steps to help reduce supply chain disruption is the only way to avoid these costs.
Proactive discovery and visibility of risks is the key to the prevention and management of supply chain disruptions.
This document provides an overview of sales and operations planning (S&OP). S&OP is a collaborative planning process that aligns all business functions to a single plan to meet market demand profitably. It differs from traditional functional planning approaches by taking a holistic view of demand, supply, and financial plans. The S&OP process involves gathering data, demand planning, supply planning, pre-meetings, and executive meetings to align plans and resolve issues. Critical success factors include top management involvement, structured meetings, cross-functional participation, and integrated planning technology. Benefits include improved profitability, inventory management, and communication across business functions.
The document discusses how supply chain management is being transformed by Supply Chain 4.0 through the application of technologies like the Internet of Things, advanced robotics, and big data analytics. Supply Chain 4.0 will make supply chains faster, more flexible, more granular, and more accurate by placing sensors everywhere, creating networks, automating processes, and analyzing all available data. This will significantly improve performance and customer satisfaction. The document outlines several ways key areas like planning, physical flow, performance management, and order management will be improved through applications of emerging digital technologies.
The document discusses the major impact of digital technologies on supply chain management. It notes that industries now deal with real-time data exchange and storage, and rapidly changing customer behavior due to information availability. This has shifted companies from "doing digital" to "being digital" as a top priority. The advent of technologies like the Internet of Things, artificial intelligence, 3D printing and others are disrupting traditional supply chain models. The document introduces the concept of a digital supply chain that uses these technologies to improve business processes and provide value to all stakeholders. It outlines some of the key benefits of digital supply chains, as well as potential disruptions across different supply chain activities from sourcing to delivery. Finally, it maps the landscape and
Procurement and sourcing involve finding suppliers and negotiating contracts to obtain goods and services for a business. There are various types of procurement like direct, indirect, and service procurement. The procurement process identifies steps to acquire necessary goods and services in a cost-effective way. Strategic procurement aims to choose suppliers that match business goals, procuring higher quality items while managing supply chain risk. Sourcing is the process of selecting suppliers to provide quality products at affordable prices through activities like market research, establishing standards, and negotiating contracts. It allows for cost management, stable supply chains, and reduced risk through strong supplier relationships.
The strategic sourcing process involves identifying a company's current category usage, conducting a supplier and market analysis, selecting an appropriate sourcing strategy, and choosing a sourcing method. Key steps include developing requests for information and proposals, evaluating responses, negotiating with suppliers, integrating new suppliers, and monitoring market performance and supplier relationships on an ongoing basis. The process aims to identify all viable suppliers, execute the best sourcing approach, conduct negotiations to select suppliers, and operationalize agreements while monitoring the category.
This document discusses improving supply chain performance by linking it to the balanced scorecard. It outlines current supply chain measures and perspectives in the balanced scorecard. It then proposes linking the two by identifying performance measures that align the internal, financial, innovation/learning, and customer perspectives of the balanced scorecard with goals like unit cost reduction, time reduction, waste reduction, and flexible response in the supply chain. Aligning key performance indicators across these perspectives can help optimize supply chain performance.
Purchasing and procurement in Material managementKaustubh Vartak
Purchasing is a subset of procurement. Purchasing generally refers simply to buying goods or services. Purchasing often includes receiving and payment as well.
This document discusses supply chain planning and scheduling. It begins by defining a supply chain and outlining the objectives of supply chain management. It then describes the three decision phases of supply chain management: supply chain strategy/design, supply chain planning, and supply chain operations. Finally, it discusses the process view of supply chains using the cycle view and push/pull view and analyzes value within a supply chain.
This document provides information and guidance about establishing a vendor management office (VMO). It discusses designing the roles and responsibilities of the VMO, including job descriptions for contract administrators, vendor analysts, and vendor auditors. It also covers selecting a vendor management database, implementing vendor management policies and procedures, and ongoing vendor relationship management tasks. The overall aim is to help organizations effectively oversee vendor relationships and gain value through a centralized vendor management function.
Achieving Excellence in End-to-End Supply Managementmubarak2009
The document discusses challenges in supply chain management for service organizations. It notes a lack of integrated processes, tools, and information across supply chains. Common issues include no single contract repository, manual contract development, and an inability to match invoices to contracts. The presentation argues that effective contract management, using standardized templates and automation, can help address these issues and drive efficiencies across sourcing, procurement, and supplier management.
The document discusses strategic sourcing and ADMA-OPCO's plans to implement it. The goals of strategic sourcing are to increase customer satisfaction, improve internal service levels and product quality, and significantly reduce total costs through coordinated purchasing across the organization. ADMA-OPCO aims to leverage its buying power to obtain goods and services efficiently for end users. The document outlines the strategic sourcing process and opportunities for ADMA-OPCO to analyze spending, the supply base, develop a sourcing strategy, manage negotiations, award contracts, and implement the strategy.
This lecture slide was prepared for my guest lecture session in Bina Nusantara University's undergraduate program of International Business Management. It discussed the role of procurement function in an organisation, and how the function has been continuously evolved to meet market expectation by engaging business partners, as well as intra-company stakeholders. It shares top tips of how buyer can create value-add to the business from the book “Value-Added Purchasing” written by Eberhard E. Schening, PhD. Enjoy this as a part of your learning journey!
1. The document outlines a framework for supply chain excellence with three focus areas: strategy, customer, and core capabilities.
2. It presents a 10-level model for assessing procurement and supply chain maturity, ranging from basic price negotiation to integrated enterprise-wide supply networks.
3. Key performance indicators and capabilities are described at each level to measure areas like compliance, cost reductions, inventory management, and collaboration with suppliers.
The document discusses the value of supply strategy and strategic category management. It outlines how taking a strategic approach to category management can connect internal and external business intelligence to improve innovation, efficiency, and total cost of ownership. The document provides examples of how strategic category management processes, such as spend analysis, supplier segmentation, and cost modeling, can help organizations achieve cost savings of 5-15% through more favorable pricing, reduced price variability, lower logistics costs, and other efficiencies.
This document provides an overview of procurement, including key objectives, processes, strategic sourcing, supplier selection criteria, negotiation, contracting, and future trends. Procurement aims to acquire goods and services in a strategic manner to impact cost control, supply chain efficiency, and business success. It involves identifying needs, selecting suppliers, negotiating contracts, and ongoing performance monitoring. Strategic sourcing takes a systematic approach to optimize costs, manage risk, and improve supplier relationships. Emerging trends include increased digitization, AI-driven decision making, supplier diversification, and circular economy practices prioritizing sustainability.
As corporations rely more and more on their supply chains to support product innovation and work efficiency and productivity, the role of procurement organizations has evolved from simply delivering cost savings to improving supplier performance, monitoring contracts, and proactively managing supply chain risk.
The document discusses procurement strategy and characterizes procurement items into four categories based on risk and expenditure: 1) Routine items with low risk and low spend, 2) Leverage items with low risk and high spend, 3) Bottleneck items with high risk and low spend, and 4) Strategic items with high risk and high spend. For each category, the document outlines the main characteristics and provides examples of potential operational strategies to manage procurement in that area. These include minimizing costs, establishing long-term agreements, developing alternative suppliers, and maintaining close communication with key suppliers.
The document discusses procurement management and the various cycles and strategies involved. It describes the requirement, requisition, solicitation, award, and contract administration cycles. It also covers make-or-buy analysis, contract types, risk allocation, and contract changes and termination. The goal of procurement management is to purchase necessary goods and services while managing relationships and contracts.
Supply Chain with Cost Optimization FlyerDan Ahearn
Gartner provides supply chain leaders with a single solution for their research and benchmarking needs through proprietary research, practitioner expertise, conferences and events, and the largest network of global supply chain leaders. They help clients optimize costs through document reviews, benchmarking programs, and research on implementing cost optimization techniques. Gartner analysts review key contracts and proposals to help clients achieve better pricing and terms. The benchmarking program allows clients to compare their performance across metrics and identify opportunities for improvement. Gartner also provides research, toolkits, and roadmaps to help clients successfully build and execute strategic plans to optimize costs.
The 7 step strategic sourcing framework is a popular model developed by ATKearney consulting to help companies lower costs through strategic procurement. The 7 steps include: 1) developing a category profile through spending and supply market analysis, 2) creating a sourcing strategy, 3) generating a supplier portfolio, 4) selecting an implementation plan such as negotiations or auctions, 5) negotiating and selecting suppliers, 6) implementing agreements, and 7) continuous improvement of the sourcing process. Major companies like P&G, HUL, IBM and Dell have used this framework to achieve cost savings of 10-20%.
The document discusses different business-level strategies including cost leadership strategy, differentiation strategy, focused strategies, and integrated cost leadership/differentiation strategy. It explains that core competencies provide competitive advantage and strategies must exploit these to satisfy customer needs. Cost leadership is achieved through low cost production while differentiation provides unique value. The strategies can be used to address threats from competition and suppliers/buyers.
The document discusses purchasing and vendor management. It defines purchasing as procuring supplies efficiently with the right quality, quantity, source, time and price. Purchasing can be viewed as a function, process, relationship or discipline. Key aspects include globalization, IT, supplier relationships, quality and lead times. The purchasing process involves identifying needs, evaluating suppliers, selection, approval and performance measurement. Integration occurs through teams and strategies like early supplier involvement improve purchasing.
This document discusses purchasing and vendor management. It defines purchasing as procuring supplies efficiently with the right quality, quantity, source, time and price. Purchasing can be a function, process, relationship or part of the supply chain. The document outlines the purchasing process cycle and how purchasing has evolved and integrated more over time. It discusses strategies like early supplier involvement, supplier development, and e-reverse auctions. It also covers supplier performance measurement, relationships, and the benefits of centralized vs decentralized purchasing structures.
1) P&G implemented a new sourcing approach called "Expressive Competition" using CombineNet's optimization software to allow for more flexible and collaborative bidding between suppliers and buyers.
2) This led to significant cost savings upwards of $100 million across multiple sourcing events while improving supplier relationships and satisfaction.
3) The new approach allowed suppliers to bid on packages of items, offer discounts, and express alternative options in a way that more accurately captured their costs and capabilities compared to traditional reverse auctions.
Strategic sourcing is a process that evaluates current and potential sourcing opportunities to assess their long-term value according to business objectives. It formulates action plans for critical supplies. Strategic sourcing is evolving from decentralized local purchasing to global, collaborative processes driven by cross-functional teams using advanced technologies. It focuses on total cost reduction, innovation, and standardization. The strategic sourcing process involves analyzing spend, requirements, the market, developing a strategy, negotiations, contracting, and implementation.
Strategic sourcing involves continuously evaluating a company's purchasing activities to reduce costs. It aims to identify cost reductions, automate sourcing processes, centralize processes, and improve supplier management. Top challenges include lack of spend data visibility, limited resources, and reluctance to adopt standardized processes. Standardization of processes and use of technology like e-sourcing, spend analysis, and contract management tools can help drive savings and spend visibility. The modern strategic sourcing program requires linking sub-processes like these to realize identified savings opportunities.
Strategic sourcing is a process that creates efficiencies across all business spending, minimizes supply risks, and provides visibility into pricing and forecasting. It involves 7 key steps: 1) analyzing spending, 2) developing a sourcing strategy, 3) researching suppliers, 4) collecting supplier information, 5) selecting and contracting suppliers, 6) measuring supplier performance, and 7) introducing supplier relationship management to maintain productive relationships. Developing an effective sourcing strategy requires understanding business needs, timelines, and communication workflows to guide the sourcing process.
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Looking to transform your FMCG business into a more competitive organisation using analytics and planning. This documents shares details on some of initiatives that can be done using Big Data Analytics, AI, Forecasting, Planning, Data Visualisation and Predictive Algorithms
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3. Amidst growing pressure to streamline business processes and enhance operational performance, complete or incremental optimization across the
sourcing life-cycle has become the need of the hour
3
BUSINESS PERSPECTIVE
S2C Process Optimization Approach
Spend
Analytics
Category
Strategy
Vendor
Management
Negotiating &
Contracting
Procurement
Invoice &
Payment
Source-To-Contract Procure-To-Pay
Value
Levers
Target
Outcomes
Volume aggregation
Domain Expertise
Labor Arbitrage
Specification management
Technology Leverage
Improved Pricing and Quality
Lower Procurement Costs
Headcount Reduction
Improved Spend Visibility
Streamlined processes
4. 01..Define & Determine
• Define sourcing categories
• Gather category intelligence
• Analyze market place
• Internal vs external process review
• Determine category strategy
03..Implement
• Price benchmarking & negotiations
• Preferred vs Strategic suppliers
• Contract negotiations
• Contract initiation
• Performance KPIs
02..Explore & Plan
• Spend Analysis
• Identify cost drivers
• Supplier relationship mapping
• Establish supplier qualification
criterion
• Opportunity Assessment
04..Calibrate
• Supplier monitoring
• Savings tracking
• Cost-benefit analysis
• Continuous price & market
intelligence
4
Build context and
scan horizon
Optimization and
cost savings
Formulate best-fit
approach
Continuous Improvement
PROPOSED APPROACH
Inclusive approach throughout Planning and Implementation cycle is critical to achieve continuous
improvement
First Quarter (or 3 months) focused on planning, set-up and initiating implementation for the rest of the year; Analysis of program
effectiveness at the end of each quarter to measure success and improvement areas
5. 5
PROPOSED APPROACH: DEFINE & DETERMINE
SPEND & COST OPTIMIZATION: Achieve Category Excellence by aligning sourcing strategy with market
movements, changing purchase dynamics and cost structures
Category Strategy & MI
Buyer vs Supplier
Dynamics
Cost Drivers
Pricing & Cost Structure
Pricing & Cost Structure
CATEGORY
GLOBE
Develop strategic playbooks that define the insight and
moves needed to –
• Create a competitive advantage
• Reconfigure bargaining power across critical
categories
Streamlining category strategy to conform with the disruptions in
external environment
Defining category cost structures through cost modeling and tear-
down analysis
Identifying the underlying cost drivers at the macro and micro level –
supply-demand balance, specifications, etc.
Developing value roadmap via collaborative optimization tools and
engaging in comprehensive scenario planning
Priority Areas
6. 6
PROPOSED APPROACH: EXPLORE & PLAN
VENDOR MIX & CONTRACT MANAGEMENT: Optimizing Vendor base to maximize cost and value benefits
with sustained TQM; Drive strategic choices that expand opportunity set
Ways to Play
Options
Spend & Cost
Analytics
Supplier
Optimization
Cost Optimization Engine
• Analysis of floor and ceiling price for services
using customized TCO modelling
• Analyze individual cost elements and
determining variables for effective
negotiation
Spend Analytics
• Full spend analysis platform to clean,
validate, classify and reports spend data
from all source systems
• Provide accurate, actionable information,
with granular, item-level visibility across the
enterprise
Develop Vendor Selection Criterion
• Scorecards developed via category intel
obtained from RFIs, Surveys, public filings
• Price-Performance-Capability Index
Evaluate Existing and Alternatives
• Performance of existing vendors using KPI
framework and price-to-performance ratio
• Identify potential alternative vendors with
better value proposition
Strategic vs Preferred
• Create a pool of strategic vendors who can
aggregate 75-80% of the volumes
Define Opportunity Set in terms of
cost saved, value delivered and turn-
around-time
• Performance and Capability benchmarking
• Cost Optimizing vendors vs Value
Maximizing Vendors
• Contracted vs off-contract volumes
• Maverick spending and discounting options
• Volume aggregation options
Visibility on cost and spend;
Assess buying power
Vendor Performance &
Strategic mix
Cost savings and Value
maximizing opportunities
7. 7
PROPOSED APPROACH: IMPLEMENT & CALIBRATE`
SUPPLIER MONITORING & RISK MANAGEMENT: Calibrate progress for continuous improvement and change
the ‘play’ if required
Opportunity Pocket Sign-off
Finalize cost saving and value creation levers
identified and deploy systems to implement
measures
Facilitate Negotiations
Leverage price and cost analysis to identify
negotiation opportunities and price leverage
for roll-out of new contracts
Contract Initiation
Set performance goals and initiate
procurement process under the new
contractual obligations
Establish Evaluation Criterion
Develop an evaluation criterion for suppliers
to measure their performance and assess
risks
Supplier Monitoring
Develop and set-up a supplier monitoring
mechanism w.r.t. quality, timeliness, country
risks, operational capabilities and financial
health
Category & Supplier Risk
Track category intelligence in real-time and
measure risks being faced by supplier(s) – to
identify new negotiation opportunities and
formulate mitigation strategies
Supply-Demand scenario
Periodically assess the supply-demand
scenario across categories to measure buyer
leverage, supplier power, price benchmarks
and disruptions
Analyze savings & Improvements
After the end of first quarter analyze cost
savings achieved and any process
improvements or supplier mix changes
required
Cost Savings & Value Creation
PRICE & SPEND ANALYSIS
SUPPLIER MIX
BUYING
LEVERAGE
CONTRACT
EXECUTION
Tools-Tech-Analysis-Process
IMPLEMENT CALIBRATE
9. Optimizing Maverick Spend
Cost Avoidance Options
Consolidating Volumes by Optimizing Vendor
Mix
Continuous Spend-Quality-Performance
reviews
Reviewing Terms & Discounting options
Centralization of S2C Process
COST SAVING: KEY LEVERS
Focus on the following pillars to deliver cost savings
10. Maverick Spend 7-10% savings can be achieved across 20% of the spend
Volume
Consolidation
Avg Savings of 8% by consolidating 70% of volumes under strategic suppliers
Low-cost Sourcing 30% cost savings on bottom 10% of the volumes procured from low-cost suppliers
Cost Avoidance Average of 1% savings across categories by chaffing out ‘what’s not required’
Purchasing
Requests & Intervals
10% savings in operational costs by streamlining (OPEX = 1% of the total spend for category)
Reduction in
off-contract volumes
25% savings on off-contract spend assuming 25% volumes are off-contract
Discounts obtained
• 4% savings in spend assuming 30% of the contracts are extended for 24 months
• 6% savings in spend assuming 15% of the contracts are extended for 36 months
• Savings of 1-3% on 30% of contractual volumes under <30 days payment period
COST SAVING: REDUCTION POSSIBILITIES
…with the below mentioned initial possibilities to save costs
12. Effective tail-spend analysis can help better planning across categories by moving un-managed spend into managed
categories, procured from strategic suppliers
12
COST SAVING LEVERS: MAVERICK OR TAIL SPEND OPTIMIZATION
Maverick or Tail Spend Optimization: can reduce 7-10% in overall category costs plus the additional savings
via lower operational hassles
Mismanagement of Tail spend is a key
pain area for majority of the procurement
departments
• Though tail spend usually accounts for
~20% of the overall spend, it can be a
quick win when targeting cost savings
• Doing an in-depth spend analysis on tail
spend helps encourage compliance and
identify maverick spend
• The smaller suppliers that add up to
around 20% of total spend are defined
as the tail.
Suppliers
Discrption01
Sample Text
Too many vendors to
effectively manage
Higher price, discounts lost,
resources drained, high
processing costs
Too many transactions and
high processing costs
Possibility of inferior quality,
compliance risks
Pricing
Transaction
TQM
What
can
Tail
Spend
Optimization
Prevent
13. Vendor Mix Optimization: can save up-to 12% in overall category costs via volume aggregation, higher
buying leverage, stronger strategic partnerships and simplified processes
Convergence
COST SAVING LEVERS: VENDOR MIX OPTIMIZATION
Predominantly
Strategic Suppliers
Diverse
Suppliers
Converge & Consolidate
Key Drivers
Opportunities
Lower Procurement Costs
High Buying Leverage
Better Account Management
Enhanced Capabilities of Suppliers
Lower Support Staff requirement
Improved Pricing and Quality
Stronger Partnerships
Headcount Reduction
Streamlined Processes
Superior Risk Management
Large organizations, consolidate 70% of the procurement volumes under a pool of 3-4 Strategic Suppliers with best
Price vs Performance ratio, to negotiate on price and ensure quality
14. 14
COST SAVING LEVERS: BEST COST SOURCING
Supplier Scouting: Exploring new suppliers in-line with “Best Cost Country Sourcing”. Companies can
potentially save up-to 30% by purchasing 10% of low-end products/services from lowest-cost suppliers
Supplier identification in
local geography
Price from local
suppliers
Supplier technical and
commercial assessment
Competitive local cost
analysis
Price in low-cost
sourcing destination
Logistics cost
Custom duty and trade
tariffs
Inland logistics and
cumulative landed cost
DESTINATIONS
LOCAL vs LOW-COST
Strategic Choices
TRADE DYNAMICS
Volumes/unit rates/lead time
Sourcing Options
Local Sourcing Analysis Landed Cost Analysis
15. 15
COST SAVING LEVERS: VOLUME AGGREGATION
Supplier Optimization: Evaluation of supplier base with respect to operational capabilities, performance track
record and financial flexibility
ILLUSTRATIVE
OUTPUT
Suppliers with best
Cost/Performance
Ratio
Account for ~2/3rd of
overall spend
STRATEGIC
Empanelled suppliers
selected for a
specific service
category to assist
those business units
PREFERRED
Back-up suppliers
required when the
regular ones can’t
meet the asks or face
crisis
APPROVED
Shortlisted solely
based on cost-
advantage for less-
complex asks
LOW-COST
Supplier Classification
16. 16
DISCOUNTING TERMS: Reviewing existing and exploring new discounting terms via expert negotiations
COST SAVING LEVERS: REVISIT DISCOUNTING TERMS
3% to 8%
• Can vary across different products
and services
• Discounts are given over the total
billed amount
Volume-Based
0% to 6%
• Less than 12 Months – No Discount
• 12 Months to 24 Months – 2% to 3%
• >24 Months – 3% to 5%
Contract Length
0% to 3%
• Less than 15 Days – 3%
• 15-30 Days – 1% to 2%
• >30 Days – 0%
Payment Cycle
Depending upon the category, additional savings can be made by negotiating service/product specifications, delivery
time and pricing model
17. THE
PROCESS
Identify Soft-
Savings
Eliminate
Transaction Costs
Consolidate
Purchase Intervals
Alternative Pricing &
Engagement Models
Harmonization of
specifications
Prevent Duplication
of Orders
Depending upon the category, additional savings can be made by negotiating service/product specifications,
delivery time and pricing model and other aspects
COST SAVING LEVERS: OTHER COST SAVING OPTIONS