CIT PRESENTATION ON

STRATEGIC SOURCING
Submitted to ::
Prof. Rajneesh Chauhan

Submiited by ::
Group 7
Mimin Ghosh (221070)
Navya Purwar (221075)
Pavan Kumar Dantuluri (221088)
Rajdeep Baruah (221113)
Raju Kumar Singh (221114)
Rupjyoti Barman (221119)

WHAT IS STRATEGIC SOURCING?
A systematic and factbased approach for optimizing an organization's
supply base and improving the overall value proposition.

STEPS IN SOURCING
The steps in a strategic sourcing process are:
Assessment of a company's current spending (what is bought, where, at what prices?).
Assessment of the supply market (who offers what?).
Total cost analyses (how much does it cost to provide those goods or services?).
Identification of suitable suppliers.
Negotiation with suppliers (products, service levels, prices, geographical coverage, etc.).
Implementation of new supply structure.
Negotiate payment terms with vendors.

ADVANTAGES OF STRATEGIC SOURCING
WAL-MART: ALWAYS LOW PRICES
SOURCING STRATEGIES
A successful supply chain management strategy can lead to lower product
costs and highly competitive pricing for the consumer.
Wal-Mart is the worlds largest and arguably most powerful retailer with:
Highest sales per square foot
Inventory turnover, and
Operating profit of any discount retailer.



Wal-Marts goal: Provide customers with the goods they wanted when and where
they wanted them.
Focused on developing cost structures for offering low everyday prices.
Goals of Wal-Mart
WAL-MARTS MARKET LEADERSHIP
Wal-Mart has been able to attain a market leadership position due to
integration of:
Suppliers
Manufacturing
Warehousing
Distribution to stores

SOURCING STRATEGIES
Vendor Partnerships: Strategic sourcing to find products at the best
price from suppliers
Cross docking and distribution management:
Technology: Largest information technology infrastructure of any
private company in the world.
Integration: Through integration of suppliers, manufacturing,
warehousing and distribution to stores.

KEY TO LOW-PRICE STRATEGY
Wal-Mart treat suppliers as Partners and not as Adversaries.
Implemented a Collaborative Planning, Forecasting and Replenishment (CPFR)
Program
JIT Inventory Program Reduced Carrying Costs- for Both Wal-Mart AND Its
Suppliers
Result: Wal-Marts Cost of Goods is 5% - 10% Less Than Competitors
HEWLETT-PACKARD
Founded in January 1, 1939 by Bill
Hewlett , David Packard
HP is the world's leading PC
manufacturer and has been since
2007
2012 it was the world's largest PC
vendor by unit sales
Merger with Compaq in 2002
HP selected Ariba Buyer procurement
platform in 1998



HPS E-PROCUREMENT STRATEGY

HP selected Ariba Buyer procurement platform in 1998
Ariba leader in spend management technology
When HP merged with Compaq
Ariba platform for its comprehensive functionality that supported HPs
worldwide deployment
Currently deployed are Ariba Buyer, Ariba Category Procurement, and OB10 (for
invoices)
deployment across all procurement functions (direct, indirect, services) of Ariba
Analysis, Ariba Category Management, Ariba Sourcing, Ariba Contract
Workbench, Ariba Compliance, and Ariba Supplier Performance Measurement


BENEFITS
Through 2005, Indirect Procurement has achieved over $1.8 billion total negotiated savings and spend
reduction.
Operation expense was reduced from 0.95% of total spend in 2002 to 0.75% in fiscal year 2005.
Implementation onto a standardized platform has resulted in the retirement of over 100 legacy
systems with estimated savings of $7 million annually.
Contract compliance has reached approximately 80% HP also gained qualitative benefits from use of
the system.
The supply base was decreased significantly and more spend was directed to preferred sup- pliers.
The spend management solution has enabled HP procurement professionals to address more
corporate spend and focus more on strategic supply initiatives.

GlaxoSmithKline plc (GSK) is a British multinational pharmaceutical,
biologics, vaccines and consumer healthcare company based in London.
It is the world's fourth-largest pharmaceutical company after Pfizer, Novartis.
The company was established in 2000 by the merger of Glaxo Wellcome plc and
SmithKline Beecham plc.
GSK has a portfolio of products for major disease.
It also has a large consumer healthcare division that includes Sensodyne, Boost
and Horlicks.
PROCUREMENT FOR R&D
Prior to implementing e-procurement, GSK scientists relied
on paper catalogue and phone communication to order the
supplies they needed.
Results:
Waste of valuable time of scientists.
Takes longer time to actually procure the materials.
GSK was not getting the benefit of negotiated deals with
suppliers.
E-PROCUREMENT STRATEGY
A cross-functional team from procurement, finance, R&D, and IT
selected SciQuests Spend Director as e-procurement tool.
The SciQuest solution had excellent functionality and allowed
them to include content from any lab supply company.
The e-procurement system includes requisition creation,
approval, distribution and receipt-creation functionality.
Today e-procurement application include lab supplies and
equipment; office supplies; MRO supplies.
BENEFITS
Contract compliance has improved more than 20%.
Implementing supplier content directly through
SciQuest allowed GSK to halt the practice of using a
wholesaler, saving more than $500,000 a year.
Streamlined procurement process, allowing the
company to capture more detailed spend
information, enhancing spend analysis.
Reduce headcount or reassign resources.
TOYSRUS BEFORE STRATEGIC SOURCING
Outdated software application
Time consuming procurement operations
Major problems for suppliers

Recognizing the potential that a transformation of procurement/supply
management could achieve, Toys R Us wanted to create a centralized
procurement organization.
CHALLENGES FOR NEW PROCUREMENT
Keeping up with very high transaction volumes.
Identifying and qualifying new suppliers to upgrade the supply base.
Launching cost-reduction initiatives with suppliers.
Transitioning from a tactical to a strategic focus.
Implementing formal strategic sourcing and supply management
systems and methodologies.

SOLUTION SELECTION AND DEPLOYMENT
Toys R Us chose the following Oracle solutions to enhance its procurement transformation:
Oracle iProcurement is the self-service requisitioning application that controls employee spending.
Benefits ::
Streamline employee ordering : eliminated error-prone paper processes with self-service ordering.
Enforce purchasing policy : enforced policies with unprecedented control and governance support.
Slash procurement costs : lowered procurement costs by cutting transaction overhead, and realizing
the full value of the organisations preferred supplier agreements.

I-PROCUREMENT &
PURCHASING INTELLIGENCE
The Purchasing Intelligence
This solution provides the metrics needed to have a practical and strategic snapshot of the purchases.
It enables you even to create your own instrument panels and use the predefined parameters to post
information concerning persons inside or outside your organisation.

Share data, warning functions, analyses, dashboards and reports within your organization and
with your trading partners.
Use dashboard features which measure and evaluate performances.
Customize the authorizations and the displays according to the end users functions.


NOVO NORDISK
Danish pharmaceutical manufacturer
Revenues of $13.6 billion in 2013.
Purchasing expenditures in 2003 totaled $492
million.
Key Issues
failure to pay invoices on time (30% to 35% ),
process inefficiencies.
Reduce maverick spending

IBX SUPPLIER NETWORK
Catalogue of suppliers
Compare suppliers
Customized catalogues

IBX Search Engine
enables end-users to search for and select
the type of product, service or supplier
needed in one place

SAP E-PROCUREMENT
Invoice capture
Paper invoices are scanned to create digital files
Validation
automatically matched and validated against the SAP vendor master data, purchase
order, and goods receipt entry.
Resolution workflow
image of the invoice and real-time overview available.
Information access
Invoice archive, automatic e-mail notification system

RESULTS
$20 million of savings in 2003
Maverick Buying dropped.
52% (2001) to 19%(2004)
COMPANY INTRODUCTION
Privately held Fortune 1000 company that provides various services to residences and firms.
Headquartered at Memphis, Tennessee.
Current ServiceMaster brands:
ServiceMaster Clean: Disaster Restoration, Janitorial and Carpet Cleaning
TruGreen: lawn care
Terminix: pest control
AmeriSpec: home inspection
Merry Maids: maid services
Pestmaster Services of California: Pest Control

PRE-IMPLEMENTATION BUSINESS
CHALLENGES
Improving the ability to negotiate best prices
Eliminating maverick spending
Better visibility into item-level spend
Better tools to assess supplier performance
Implementing a consistent procurement process
Enabling a disciplined and decentralized buying practice.

SOLUTION DEPLOYMENT
Solution selected: Ketera
Reasons for Selection:
High cost-effectiveness
Delivered on demand
User-friendliness
Use of Ketera supplier services
PROCESS SUMMARY
Processes Steps Involved
Product requisition Custom catalog to the branch level
Supplier catalog (punch out and hosted)
Lease products (capital equivalences)
Order execution and approval By commodity
By spend limits
By supplier
Invoice process Supplier PO flip
Supplier EDI interfaced
Invoice audit/rejection
RESULTS
Cost savings through contract pricing and pricing compliance
Easier spend aggregation
Single interface
Single purchasing platform
Scalability
COMPARATIVE
STUDY
COMPARATIVE STUDY
Company Solution Provider Issues Faced before e-procurement
Novo Nordisk SAP, IBX Failure to pay invoices on time (30% to 35% of invoices were
not being paid on time), and process inefficiencies.
GlaxoSmithKline SciQuest Spend Director Paper catalog and phone communication to order the supplies
Toys R Us Oracle Solutions Heavy use of inefficient, paper-based processes,
manual matching and codification of invoices and manual re-
keying and mailing of paper checks to suppliers.
ServiceMaster Ketera Technologies Lack of visibility into item-level spend & lack of tools to assess
supplier performance
Hewlett-Packard Ariba Lack focused on addressing non-compliant spend, local
sourcing and strategic procure- ment activity, and global
sourcing and procurement activity.
Wal-Mart Lack of focus on developing cost structures that allowed it to
offer low everyday pricing
RESULTS
Company Results
Novo Nordisk $20 million of savings in 2003
GlaxoSmithKline $500,000 a year
Toys R Us Savings attributed to e-procurement 30% in 2003
ServiceMaster Savings ranging from 7% to 20%
HP $1.8 billion total negotiated savings and spend reduction
Wal-Mart Cost Of Goods is 5%- 10% less than the competitors.
THANK YOU