Professional Documents
Culture Documents
A System-wide, Collaborative
Purchasing Process
MISSION
To develop and implement an effective
Strategic Sourcing
Goals
Strategic Sourcing
Data Integrity
Rigorous Analysis
Fact Based Decisions
Strategic Sourcing
Road Map
Conduct Spend Diagnostic
Identify/Prioritize Opportunities
Launch Cross Functional/Divisional Teams
Establish User requirements
Execute RFP Process/Select Supplier
Monitor Compliance
Collaborative
Purchasing
Process
INCREASED CUSTOMER
SATISFACTION and
SIGNIFICANT COST
REDUCTIONS
E-Procurement Development
Products and
Services
Implementation
of Best Practices
Best Practices Analysis
Processes
MISSION
STRATEGIES
TACTICS
Major Commodity
Relationship Groups
Professional Services
Professional Services
Temporary Services
Miscellaneous
Utilities
Misc. Equipment
Printing Services and Supplies
Furniture
Business Equipment
Freight & Shipping Supplies
Misc. Other, Includes:
Services
Medical Services
Food Services
Entertainment Services
Travel
Misc. Services
Security
Environmental Services
Supplies
Laboratory Supplies
Maintenance/Repair/Operations
Medical Supplies
Multimedia Supplies
Office Supplies
Pharmaceuticals
Telecommunications/Computer
Computer Equipment
Computer Supplies/Software
Telecommunications Equipment/ Services
benefits
From low cost to highquality sourcing
Managing the SourcingBusiness Processes
recallmanagement
End-User Involvement
Strategic Sourcing
An analytical acquisition approach to
achieve best value through standardization and
leverage that results in significant savings and
fulfillment of socio-economic and
environmental requirements.
Strategic Sourcing is
A Disciplined Analysis of Purchases, Markets and
Suppliers
To Identify Opportunities for Savings
By Negotiating Contracts and Employing New Tools
and Practices
That Lowers Costs and/or Adds Value
While Maintaining Goods and Services
Identify and
Prioritize
2
Commodity
Profile
Identification
Commodit
y
Market
Analysis
Develop
Commodity
Strategy
Execute
Acquisition
Strategy
Implement &
Manage
Performance
Page 12
Profile Of
Sourcing Group
Best Price
Evaluation
Continuous Benchmarking Of
Supply Market
Product
Specification
Improvement
Strategic
Sourcing
Expand
Supply
Base
Competitive Supplier
Selection
Operational Integration
With Suppliers
Create an Advantage
Conduct product value analysis and
engineering
Substitute materials
Pursue system buying alternatives
Optimize life cycle costs
Joint
Process
Improvement
Relationship
Restructuring
New Tools
Online (e) RFPs
Internet Negotiations (Reverse Actions)
Source: http://www.naspo.org/documents/Strategic_Sourcing_All.ppt....
Fairness Considerations
Product
Volume
Concentration Specification
Improvement
Best Price
Evaluation
Strategic
Sourcing
Global
Sourcing
Drivers of Competition
Joint
Process
Improvement
Relationship
Restructuring
September 2004
June 2007
Phase I 45 Days
Opportunity
Assessment
4 + Months depending
on category
Wave I Sourcing
Opportunities
Wave II Sourcing
Opportunities
Communications and Change Management
Internal Stakeholders and External Vendors
Savings Collection
Team CGI-AMS Role
Revenue Growth
Broaden
Offerings
Improve
Customer Value
Proposition
Effective Cost
Management
Internal Cost
Structure
External Cost
Structure
Reduce
Assets
Improve
Utilization
Goal Comparison
Business Operations
wants
Continuity
Quality of Service
Budget Optimization
Supplier
Management
Strategic Sourcing
Gather
Information
2
Initial
GO
Implement
Strategy
Analyze
Current
Situation
Assess
Supply
Base
Develop
Sourcing
Strategy
Strategy
GO
Engage
Suppliers
Develop
Transition
Plan
Execution
GO
Manage
Supply
Base
Procurement
Source: http://www.pptsearch365.com/Sourcing-Improvement.html....
Critical Elements
Identification
Analysis
Total Cost Modeling
Process redesign
Supplier reduction
Leverage
Disintermediation
Supplier Management
Additional Baseline
What is the labor cost
How does technology fit
Who will lead the team
What skills are needed
What resources are available to the team
What is the scope
What are the boundaries
How will we secure commitment
How will we maintain commitment
What are the incentives
Perform a task?
Improve a process?
Solve a problem?
Make a decision?
made?
Accounting Dept
Purchasing Dept
(invoice files)
Volume purchased by
supplier (A/P)
Seasonality of purchase
(A/P, G/L)
Unit prices
Price and pricing bases
Supplier characteristics
Sales Dept.
Seasonality of end product
Sales Dept. requirements to
past suppliers
Capacity
Quality
Location
Term of payments
Supplier constraints
Product specs
Potential suppliers
Spend Analysis Software
Manufacturing Dept
Incoming quality history
Volume by site
Seasonality of usage
Technical/Engineering Dept.
Product specs
Potential suppliers (name,
capabilities, quality)
Current supplier (capability,
quality, certification)
Bill of material structure
Possible alternative
products
Suppliers/Others
Volume history
Pricing
Service performance
Technical specs
Suppliers
Where to find
Directories
Yellow Pages
Chamber of Commerce
Minority Purchasing
Thomas Register
Networks
Internet
Minority Councils
SBA
Trade Shows
Other buyers
Financials
Total Annual Revenues
Total Assets
Annual revenues in the outsource
segment
Financial rating
Sales Growth
Organization
Structure
Culture
Processes
Qualifications of operating
management
What is Outsourcing?
Outsourcing the strategic use of outside resources to perform
activities traditionally handled by internal staff and
resources Dave Griffiths
Why Outsource?
Provide services that are scalable, secure, and efficient,
while improving overall service and reducing costs
OUTSOURCING
What is outsourced?
Advertising
Architecture/Engineer
ing
Audio Visual
Asset Repair
Communications
Computer systems
support
Construction
Customs Brokerage
Environmental
Facilities
Management
Fleet Management
Food Service
Fork Truck Repair
Graphic Arts
Hearing Testing
Human Resources
Internal Audit
Inventory
Management
Investment Recovery
Janitorial/Custodial
Laboratory Services
Legal
Logistics
Mailroom
Management
Information Systems
Manufacturing
Engineering
Manufacturing -Subassembly
Marketing
Medical Order Entry
Payroll
Printing
Purchasing
Quality Assurance
and Control
Research and
Development
Real Estate
Records Managment
Recruiting
Relocation
Risk Assessment
and Management
Safety
Security
Security Alarm
Systems
Telecommunications
Telemarketing
Temporary Labor
Training
Translation Services
Travel
Vehicle Maintenance
Vending Management
Vibration Analysis
Warehousing
Waste Hauling
Wellness Programs
2. Strategic determination
Yes
Do we understand and can we fund and implement the
process or technology?
No
Yes
Outsource
No
Outsource
Yes
The yes answer implies that this is
an area where we are capable of
distancing ourselves from our
competition. Develop as a specific
source of differentiation, a possible
core competency of the business, a
necessity of the marketplace; we
definitely want to be doing this long
term.
3. Strategic Determination
Shoot for Best in Class, what is the gap between where
we are and present best in class - what will it take to
close the gap,
4. Strategic Determination
Evaluate - if in a reasonable period of time sufficient
progress is not made to close the gap, consider
outsourcing to a strategic supplier, this just might not be
your thing.
5. Exit Strategy
*Adapted from a model developed by Hamel and Prahalad
Outsourcing
Decision
Model
Reasons to Outsource
Improve the business focus
Improve service level
Access to larger capabilities
Share risks
Accelerate benefits of re-engineering
Replace outdated systems
Reduce or control costs
Provide a cash infusion
Make capital funds available
Free non capital resources
Supplier Management
Relationship Management
Define Appropriate Management
Structure
Contract Management
Issue Resolution
Market Dynamics - suppliers
position relative to market
New Products, services &
technology
New suppliers
Competitor evolution
Pricing relative to market
Communication Plan
Metrics
Confirm goals
Understand issues & current
metrics
Create metrics
Confirm collection methods
Set up review procedure
Take action based on
metrics
Communicate results
Structured Process
Improvement
Set Goals
Review progress
Communicate results
When to Outsource
PricewaterhouseCoopers Model
Strategic
Non-Strategic
Competitive
Not
Outsourced
Grey
Area
Non-Competitive
In House
if Possible
Outsource
Program implementation
Transferring staff
Service Level Agreement (SLA)
Establish communications between partners
Actual transfer of the service
Establish management procedures
Contract agreement
Contract fulfillment
Outsourcing Models
Outsourcing Models