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Question 1: Strategic Sourcing Process
Step 1:
Profile the
Category
Step 2:
Supply
Market
Analysis
Step 3:
Develop
the
Strategy
Step 4:
Select the
Sourcing
Process
Step 5:
Negotiate
& Select
Suppliers
Step 6:
Implement &
Integrate
Step 7:
Benchmark
& Track
Results
Background Question 1 Question 2 Question 3 Question 4 Lessons Learned
• To guide the supply management group to
make optimal purchasing decisions, a
strategic sourcing process should be
implemented.
• We formed seven steps that address the
most important action items.
Step 1: Profile the Category
Background Question 1 Question 2 Question 3 Question 4 Lessons Learned
1
• Define the category and commodities in it.
2
• Quantity used? Types? Sizes? Who are users? Locations? Processes?
3
• Data must be documented in detail.
Step 2: Supply Market Analysis
Background Question 1 Question 2 Question 3 Question 4 Lessons Learned
1
• Identify local and global suppliers.
2
• Analyze them for potential risks and opportunities.
3
• Calculate raw material prices, labor, and transportation.
Step 3: Develop the Strategy
Background Question 1 Question 2 Question 3 Question 4 Lessons Learned
1
• Decide where to buy while minimizing risk and cost.
2
• Assemble cross-functional team.
3
• Alternatives to current suppliers? How competitive is marketplace? How open
are users to new suppliers?
Step 4: Select the Sourcing Process
Background Question 1 Question 2 Question 3 Question 4 Lessons Learned
1
• RFP to solicit bids.
2
• Specifications, delivery, and service requirements.
3
• Pricing breakdown, legal and financial terms and conditions.
Step 5: Negotiate & Select Suppliers
Background Question 1 Question 2 Question 3 Question 4 Lessons Learned
1
• Reduce bids to valid ones. Ask for clarifications if needed.
2
• Multiple rounds of negotiations. Establish a short-list.
3
• Approval and sign-off by team.
Step 6: Implement & Integrate
Background Question 1 Question 2 Question 3 Question 4 Lessons Learned
1
• Notify selected bidder.
2
• Include bidder in implementation process.
3
• Communicate improvements, processes, changes in delivery, service
requirements, and pricing.
Step 7: Benchmark &Track Results
Background Question 1 Question 2 Question 3 Question 4 Lessons Learned
1
• Start of continuous cycle moving forward.
2
• Benchmark categories, monitor results, ensure full value is achieved.
3
• Back to Step 1 to re-assess constantly evolving markets.

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Strategic Sourcing Process

  • 1. Question 1: Strategic Sourcing Process Step 1: Profile the Category Step 2: Supply Market Analysis Step 3: Develop the Strategy Step 4: Select the Sourcing Process Step 5: Negotiate & Select Suppliers Step 6: Implement & Integrate Step 7: Benchmark & Track Results Background Question 1 Question 2 Question 3 Question 4 Lessons Learned • To guide the supply management group to make optimal purchasing decisions, a strategic sourcing process should be implemented. • We formed seven steps that address the most important action items.
  • 2. Step 1: Profile the Category Background Question 1 Question 2 Question 3 Question 4 Lessons Learned 1 • Define the category and commodities in it. 2 • Quantity used? Types? Sizes? Who are users? Locations? Processes? 3 • Data must be documented in detail.
  • 3. Step 2: Supply Market Analysis Background Question 1 Question 2 Question 3 Question 4 Lessons Learned 1 • Identify local and global suppliers. 2 • Analyze them for potential risks and opportunities. 3 • Calculate raw material prices, labor, and transportation.
  • 4. Step 3: Develop the Strategy Background Question 1 Question 2 Question 3 Question 4 Lessons Learned 1 • Decide where to buy while minimizing risk and cost. 2 • Assemble cross-functional team. 3 • Alternatives to current suppliers? How competitive is marketplace? How open are users to new suppliers?
  • 5. Step 4: Select the Sourcing Process Background Question 1 Question 2 Question 3 Question 4 Lessons Learned 1 • RFP to solicit bids. 2 • Specifications, delivery, and service requirements. 3 • Pricing breakdown, legal and financial terms and conditions.
  • 6. Step 5: Negotiate & Select Suppliers Background Question 1 Question 2 Question 3 Question 4 Lessons Learned 1 • Reduce bids to valid ones. Ask for clarifications if needed. 2 • Multiple rounds of negotiations. Establish a short-list. 3 • Approval and sign-off by team.
  • 7. Step 6: Implement & Integrate Background Question 1 Question 2 Question 3 Question 4 Lessons Learned 1 • Notify selected bidder. 2 • Include bidder in implementation process. 3 • Communicate improvements, processes, changes in delivery, service requirements, and pricing.
  • 8. Step 7: Benchmark &Track Results Background Question 1 Question 2 Question 3 Question 4 Lessons Learned 1 • Start of continuous cycle moving forward. 2 • Benchmark categories, monitor results, ensure full value is achieved. 3 • Back to Step 1 to re-assess constantly evolving markets.

Editor's Notes

  1. In our case, categories could be transportation, packaging, etc. Commodities include carboard, tape, etc.
  2. Cross functional team is very important to incorporate diverse opinion. How open are users to new suppliers? This will be difficult and I expect pushback on this one. No one who has a prefered vendor likes to change it b/c someone in procurement is telling you to. Therefore, you need to relate to them the value that the change will bring for them and not just cost cutting.
  3. This is the paperwork aspect of the process. Putting your ideas and knowhow into the actually procurement process and getting the contract worked up.