Presentation I gave on May 19th, 2015 at Northwestern University’s Kellogg School of Management today, talking to Prof. Allon’s MBA class about Sourcing Strategy.

1. Sourcing Strategy
Arnon Kraft
Senior Director for Strategic Sourcing,
Microsoft
arkraft@microsoft.com
arnon@arnonkraft.com

2. Background & Journey
Strategy
Essentials
Key Takeaways
Questions
Sourcing
Strategy
AGENDA

3. Background & Journey
Strategy
Essentials
Key Takeaways
Questions
Sourcing
Strategy
AGENDA

4. 54321Marketing & Biz Dev
msystems (2002-2006)

5. VP Ops & Technology
SanDisk (2006-2008)
54321

6. 54321VP Operations
modu mobile (2008-2010)

7. 54321Ops & Mgmt Consultant
(2011)

8. 54321Sr. Director of Sourcing
Microsoft (2012-Present)

9. Background & Journey
Strategy
Essentials
Key Takeaways
Questions
Sourcing
Strategy
AGENDA

10. strat·e·gy /ˈstrætɪdʒi/ Show Spelled [strat-i-jee]
1. Also, strategics. the science or art of combining and employing the
means of war in planning and directing large military movements and
operations.
2. the use or an instance of using this science or art.
3. skillful use of a stratagem: The salesperson's strategy was to seem
always to agree with the customer.
4. a plan, method, or series of maneuvers or stratagems for obtaining a
specific goal or result: a strategy for getting ahead in the world.
Strategy

11. Strategy
Purpose

12. Strategy – simplicity and clarity

13. ”a profound quote about sourcing” *
Sourcing

14. Sourcing Strategy
Develop a World Class Organization
Hire, Develop & Retain
Aggressive Cost
Management
Effectively Deliver
Product / Services
to Market

15. Cost
• A total cost of ownership approach: should-cost,
cost of quality/inventory/flexibility, cost curves
• Leverage industry expertise and relationships:
book of business, scale, technology trends
• Provide best solution at right value: industry
expertise, influence design, market trends
• Manage both risks and opportunities

16. Supply
• Design for supply
• Know your category - identifying market
trends, understanding your agreements
• Proactive risk mitigation plans: buffer
inventory, pre-buys, multi source, joint
ventures, M&A

17. Scale
• Long term thinking: fire drills vs. long term
technology trends
• How to build the org for long term success:
people, processes, tools, culture
• One product line  multiple product lines
• One location  multiple sites

18. Quality & Compliance
• Tradeoff with design for cost?
• Consumer vs. Industrial vs. Military
• Over-engineering
• Supplier quality management approach

19. Background & Journey
Strategy
Essentials
Key Takeaways
Questions
Sourcing
Strategy
AGENDA

20. Flexibility
• Adjust supply chain to meet changes and shifts
in the market
• Partners footprint
• Sole/Single/Dual/Multi Source
• Multi source tradeoffs

21. Agility
• Build a supply base that will allow quick
response times to short-term changes in
demand or supply
• Flow of information to suppliers
• Buffer inventory strategy
• Contingency plans

22. Alignment
• Sourcing org considerations: structure & location
• Align interests, create incentives
• Know your limitations
• Share risks, costs, gains
• Potential to scale
• Culture, costing, inventory, MOQ’s etc

23. Partnerships
• Internal: not us vs. them, care about their problems
more than they do.
• Strategy or Rules, Restrictions and Control?
• Escalations: who’s credibility is it building?
• External: your reputation in the industry
• Fair game

24. Background & Journey
Strategy
Essentials
Key Takeaways
Questions
Sourcing
Strategy
AGENDA

25. 1. Prepare for negotiations. 80% of work is internal. Know your should cost.
3. Build partnerships. Reach out, contribute to the success of others, build your credibility.
2. Own your space. Know industry trends and dynamic better than anyone.
Call To Action

26. Extra Credit
Getting to Yes
Roger Fisher and William Ury
Know what to expect
Social Physics
Alex Pentland
How to leverage ideas of others
www.chinasolved.com
Chinese Negotiation Strategies
Balance of powers
www.steveblank.com
How to engage others – partner
development
www.scmblog.com
Some interesting reviews and
analysis
Outliers
Malcolm Gladwell
Being relentless, power of
dedication

27. Background & Journey
Strategy
Essentials
Key Takeaways
Questions
Sourcing
Strategy
AGENDA

28. arkraft@microsoft.com
arnon@arnonkraft.com
www.linkedin.com/pub/arnon-kraft
www.facebook.com/arnon.kraft
www.slideshare.net/ArnonK
Sourcing Strategy – Q&A
Arnon Kraft
Senior Director for Strategic Sourcing
Microsoft