This document discusses strategic sourcing and developing a globally integrated supply chain. It begins by outlining the benefits of strategic sourcing, such as rising profitability and competitive advantage. It then defines strategic and tactical, and discusses how sourcing is typically done incorrectly. The rest of the document provides information on developing a strategic global sourcing process, including spend analysis, goals alignment, and developing relationships with global suppliers. It emphasizes quality, product development, and project management in global sourcing.

1. Strategic Sourcing for Optimal
Supply Chain Management
John Long, President & Principal
Consultant of NMT Company, LLC

2. Learning Path
Achieving a globally integrated supply chain is a
transformation process and an ongoing journey.
While the voyage is challenging, it can be
fruitful, resulting in rising profitability, enhanced
customer satisfaction, reduced costs, and
heightened competitive advantage—if you
implement strategic sourcing. In this
presentation, you will learn to identify, select,
and maximize resources in emerging markets,
as well as how to connect both sides of the
supply chain for significant progress.

3. Fragmented Global Supply Chain
What does it look like?
How sourcing can be typically done wrong...
…..
More time is spent managing the lengthy
process rather than leveraging suppliers
Lack of resources & infrastructure
Confusion regarding objectives
Overemphasis on cost as sole criteria
Technology constraints
Disenfranchisement of Business
cross-functional teams disruptions
Inconsistent sourcing methodologies

4. What Is A Globally Integrated Supply Chain Like?
Communication
Materials: Engineering Strategy Execution
•Electrical Design Order
•Mechanical Technology
Planning
Order
•MRO Creation
•Others
Strategic Order
Sourcing Execution and
Settlement
Services:
Construction SAP
•Subcontract Order
Maintenance
•Wind farm Planning
Environment
•Const/Mgmt
•Vegetation
Collaboration

5. Definitions
stra·te·gic; adjective (1825)
c : of great importance within an integrated whole
or to a planned effect
tac·ti·cal ; adjective (1570)
(1) : of or relating to small-scale actions serving a
larger purpose (2) : made or carried out with only a
limited or immediate end in view
Fad ; noun (1867)
: a practice or interest followed for a time with
exaggerated zeal : CRAZE

6. Why Strategic Global Sourcing?
• In 2000, most firms had < 20% of their annual
spend allocated to global sourcing.
By 2010, it’s estimated that more than half of
firms will have a global spend of > 40%, with nearly
one-fifth of firms spending > 80% of their annual
spend in the global sourcing arena.
• What do these Fortune 500 companies have in
common?
IBM ($50bil) Wal-Mart ($9Bil) - Shenzhen
AMAT ($2Bil) – Xi’an
• Trade Journal, Magazine, Internet, thought leaders
• The launch of the new APICS Global Sourcing
Workshop Series in September 2008

7. Understanding Global Sourcing Needs
• Are you losing customers to low-cost
imports?
• Do you need to improve your bottom line by
leveraging your global presence?
• Do you need to find suppliers in lower cost
countries to help reduce your costs?
• Have you been reluctant to source globally
because of what you have heard about
quality and potential theft of intellectual
property?
• Have you always wondered how business
was conducted in a different country?

8. Global Supply Chain Strategy Maps

9. Developing Global Sourcing Solutions
• Global sourcing
• Cost reduction
• Quality assurance
• Excellence in execution
• Cooperation & communication
• Product development
• Project management

10. What Drives Global Sourcing?
• Growth drivers such as differentiation of products in
terms of affordability, quality, availability, etc.
• Leverage spend global presence-economies
scale – and technology more effectively.
• Organizational directions and business strategies to
position products and services with increased agility.
• Business transformation driven by cost, product
quality, and customer service with global scalability
and flexibility.
• Advantage through reduced price points and enhanced
competition, not ‘just to cut cost’.
• Long-term access to cost-effective capabilities.

11. Strategic Sourcing Process
• Spend analysis – sort out commodities, streamline and map out
corporate supply chain solutions
• Organize for the future, opportunistic approach to developing a new
supply strategy, obtain business involvement & consensus
• Ultimate goals and objectives alignment (the deliverables)
• Review historical issues, supplier usage/performance; determine
future items & supplier requirements/expectations; and assess
future state against current supplier capabilities
• Cooperation and collaboration within and across organizational
boundaries (cross functional) communicating commercial issues
• Increases ongoing efficiency and responsiveness of the supply
chain, interaction with supplier partners, identify their capabilities
• Negotiation in CAMPish and competitive environments, negotiate
fairly but effectively
• Grow supplier relationships by requiring competitive performance
and suggesting goals for continuous improvements

12. A Consistent Global Sourcing Strategy
Spend Analysis Technical requirements
Yield optimal Spend by part/category and specs matched to
relationship Spend by region capability
•Competitive Spend by supplier •Right-source based on
performance Spend by business unit criticality
•Continuous Spend by month/year
improvement
Global key suppliers Review historical issues
Market trends Category Characteristics
Supplier capabilities Specifications
Cost Reduction
Regional economics Functionality
STRATEGY
Global economics User requirements
Product trends Criticality to business
Competitive analysis VA Opportunities
Expending global Total Cost of Ownership Align goals &
network complexity Internal costs objectives with
Supplier costs reengineering cost
•Reduce uncertainty
Economic levers •Understand all
•Prepare for unexpected
Engineering of product cost elements
Performance criteria •Benchmarking

13. Quality …matters more even in
Global Sourcing
Finds Defect in US Customer of
Supplier Identifies Client’s Mfg. facility Client finds Defect
Defect In their facility at project site
Rule of 10’s
$10,000 $100,000
• Client Writes supplier NCR • Client writes SN
$1,000
• Parts dispositioned • War room review
• Supplier submits to MRB • Client or supplier corrects • Huge $$ to correct
• Parts dispositioned • Supplier capability questioned • Supplier recovery
• Supplier corrects
• Client builds trust

14. Product Development
• Product assemblies and subassemblies that benefit most from the lower-
cost regions due to their time-consuming and labor-intensive nature.
• Research, identify, and select international suppliers who are a good match
for your business, offering quality products or services meeting your
specifications.
• OEM/Other industrial product specialty and knowledge to align optimal
global sources for your custom engineered products.
• Developing a new product takes a broad pool of qualified business partners
and suppliers throughout the world, covering a diverse range of
industrial/OEM products, components, and assemblies.
• Unexpected events may surprise some, therefore always stand ready to
meet them with confidence. For a product based company, transportation
lead time is one of the biggest issues in international sourcing.
• China - with its accession to the World Trade Organization (WTO), the Holy
Grail of distribution and trading rights is within reach.
• Trial (or pilot run) to identify the kinks before going full-scale. Find creative
ways to meet requirements and deadlines and consistently assure a success
for every shipment.

15. Project Management
 Project scoping includes all details – from tooling requirements to
logistics coordination – for a cost-effective and fully managed project.
 Required tooling and/or machinery developed in Asia is often more
cost-effective, such as progressive dies for precision metal stampings or
injection molds for plastics.
 Operation management – the overseas production operation
managed to attain full benefit from the labor and cost savings.
 JIT delivery – from the international supplier factory floor to delivery
to Customer the international project can be as seamless as the
domestic one.
 Engineering Coordination – integrate valuable engineering input into
overall global sourcing project, adding benefits, reducing cost, and more.
 Cost Reduction – combine the cost efficiencies to produce results,
aligning sourcing requirements with growing network of global suppliers.
 TQM – quality assurance factors into every detail of the Project
Management process.

16. GLOBAL SOURCING
THREE WAVES OF VALUE CREATION
H Business Continuous
Transformation Improvements
(not transaction) Process Optimization
that requires Sustainable Growth
strategies
Efficiency
“standardized
infrastructure”
Quality
“Quality Process”
Leverage
(Quality
at low cost)
= Future
Cost
“Cheap labor”
low cost
without quality
Transformational H
L Speed (continuous improvements)
Strategic
Negotiation Tactical
(long term)
(immediate) (short term)

17. Roadmap to Opportunity
Strategic relationship proactively
create savings opportunities
Collectively work
with both supply chain
and operations
Work only with
operations
or supply chain
Multiple
transactions
Bid buy single transactions Win/Win

18. Supply Chain Maturity and Alignment
with Strategy Map
External
Functional Horizontal
Collaboration
Excellence Integration
Static Supply Chain
(Corporate Silos)
Quality
Enhancement
Cost Reduction Process
Improvement
Value Propositions

19. Major Takeaways
• Achieving Goals: Achieving a globally integrated
supply chain
• Understanding the Approach: strategic sourcing -
a transformation process and an ongoing journey
• Techniques and Applications: to identify, select,
and maximize resources in emerging markets, as
well as how to connect both sides of the supply
chain for significant progress
• Deliver Results: rising profitability, enhanced
customer satisfaction, reduced costs, and
heightened competitive advantage

20. Questions
New Millennium Technology Company
4105 Dornoch Lane
Norman, OK 73072 USA
Tel: (405) 618-8882
Email: info@newmillenniumtechnology.com