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The CPO’s Guide to Strategic Sourcing


A 10-step guide to strategic sourcing implementation

0 (https://www.deltabid.com/strategic-sourcing-guide-for-cpos/) 1 (/strategic-sourcing-process/)

2 (/supply-market-analysis/) 3 (https://www.deltabid.com/supply-chain-benchmarking/)

4 (https://www.deltabid.com/strategic-sourcing-methodology/)

5 (https://www.deltabid.com/the-purchasing-chessboard/) 6 (https://www.deltabid.com/vendor-selection-process/)

7 (https://www.deltabid.com/rfq-process/) 8 ( https://www.deltabid.com/keeping-the-stra…-cycle-in-motion/)

9 (https://www.deltabid.com/strategic-sourcing-tools/) 10

Chapter 10:
Creating an All-Star Strategic Sourcing Team

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Successfully
5/3/2018 implementing an e ectiveHow
strategic sourcing
to Select an process
All-Star Strategic requires
Sourcing collaboration from both
Team : DeltaBid

internal and external stakeholders. With so many people involved, your strategic sourcing team can
make or break the success of your project. This chapter shows you how to select the right players for
top-notch category management.

Read on to learn more about:

1 How to select category team members


2 Why you need a review board and steering
committee
3 The importance of building your team’s credibility
 

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(http://info.deltabid.com/chapter-10-strategic-
sourcing-team-pdf)

Introduction
Strategic sourcing initiatives usually originate with top management. At some point, they come to the
conclusion that the costs of goods and services are not being managed well enough, such as when global
price trends go down but the company’s procurement spend fails to follow suit. Or perhaps the decision
is driven by poor supplier performance, and they want to motivate suppliers to improve.

Whether it’s one case or the other, the CEO may decide to hire a chief procurement o cer (CPO). This
newly hired CPO needs to dive into this sea of problems and search for opportunities to x them. He/she
needs support and guidance on where to start. While this guidance may come from outside sources,
such as this strategic sourcing guide, the CPO will soon discover there’s too much for one person to
handle.

Organizational structure
Before we describe the organizational structure at the category level, we need to address the big picture.
By de nition, Strategic Sourcing should be a strategic function. In order to run Strategic Sourcing, the
responsible person needs to have the authority to operate companywide, beyond the borders of his or
her own function.

In large corporations, Strategic Sourcing is typically run by the Supply Chain Manager (SCM) or Chief
Procurement O cer. At the very least, he or she must hold a managerial position and be able to count
on strong CEO support. If you break it down, a SCM is usually responsible for the full material value chain
from supplier through production down to the customer. A CPO is typically responsible for inbound ow,
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sourcing
5/3/2018 and procurement. In small orHow
medium-sized companies
to Select an All-Star there
Strategic Sourcing Teamare fewer management levels
: DeltaBid

and fewer individual roles. For example, there may be a CPO or Head of Procurement, but their
responsibility actually covers the management of the entire supply chain.

Large international companies tend to have a matrix organization structure. With this type of
organizational structure, local CPOs may have more than two managers to whom they’re required to
report. Usually the line manager is a local business manager, but functionally he reports to the country
SCM and global business unit SCM.

Depending on the size and geographical coverage of your company, sourcing tasks can be divided into
di erent categories and regions. In order to assemble your category team without creating con icts with
line management, you need to understand your company’s reporting structure. Team members should
be nominated pending approval by their line managers.

How to build up your category team


Back in chapter one, we started with de ning your category scope (https://www.deltabid.com/strategic-
sourcing-process/#scope-selection). This provides your team with a speci c focus. Once you’ve de ned
your scope, then team members should be selected based on category team targets.

Let’s look at one global category as an example: roller bearings. Roller bearings are used in several
industrial applications, such as robotics, motors and generators. In this example, these applications are
used in di erent global business units, and they’re produced in di erent regions of the world. Take a
look at the graph. The size of the bubble indicates spend volume by global business unit. When it comes
to category teams, business units with a larger spend volume take the lead and coordinate category
activity globally. For example, the BU Robotics category team member should come from the Americas,
but he is responsible for coordinating volumes and actions with other the regions within the same BU.
Similarly, the BU Generator team member should come from Europe, and so on.

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5/3/2018 How to Select an All-Star Strategic Sourcing Team : DeltaBid

Fig.1 Roller Bearings Category Team Members

You should select team members based on the geographical, business and functional areas your
category scope covers. Note that every interested group should be included. If your team members are
from other units, then make sure you get approval from the management of those organizations. Your
team should also have a similar knowledge base and a common understanding of strategic sourcing as a
process. (The CPO’s Guide to Strategic Sourcing is a good base to work from!)

Once you have your team in place, you should agree on house rules and working guidelines. When you
work in di erent time zones, you should have a proper document sharing platform. Sharing information
and regular communication is absolutely necessary for e ective teamwork. (This article has a list of
seven online tools (http://blog.deltabid.com/blog/procurement-tools/) your global team can use to help
boost productivity.) Team members should also play a role in setting up the decision-making process,
and then have authority to enforce those decisions in the home unit.

Review board
In addition to the regular category team members, you may choose to involve experts from other
functions like manufacturing, quality, IT, development, engineering or nance, depending on your team’s
needs. The review board is responsible for evaluating ideas, providing specialized input and pre-
approving team decisions.

Steering committee
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Besides
5/3/2018 the review board, you also need
Howto haveanaAll-Star
to Select steering committee.
Strategic Sourcing TeamThe review board is more of an
: DeltaBid

advisory board, and the steering committee empowers your team’s decisions and makes change happen
within the organization. The steering committee usually includes the CEO or, in larger companies, the
business managers who are most interested in the success of the category team. The steering
committee sets the targets, and category manager reports back to the committee on the team’s progress
and results.

The category manager can also brings up strategy questions for the steering committee to discuss. When
strategic decisions go through the steering committee, it’s easier to enforce the category team’s
decisions within the organization. Changing suppliers or components might look easy on paper, but
these changes are often faced with resistance for a variety of reasons.

Team credibility
Did you know that 90% of end product costs are decided during the design and engineering phase?
There is a huge potential for savings if an experienced category manager comes on board right away
during the product design phase. However, if your nal product has already in production, you have only
limited cost saving potential. Without credibility, the category team won’t be invited to join the design
and engineering workgroups, and the company will not reach its strategic sourcing targets.

Fig.2 Savings potential in di erent product lifecycle phases

Your category team should constantly be looking for ways to sell its value to internal stakeholders. One
of the best ways to do this is adopt a more service-oriented mindset. Think of your stakeholders as
customers (http://blog.deltabid.com/blog/the-value-of-a-customer-centric-procurement-function/). After
all, your team’s goal is to work with them to meet their needs while also meeting the objectives of the
overall organization.

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Soft skills
5/3/2018 How to Select an All-Star Strategic Sourcing Team : DeltaBid

While in the process of selecting your team members from various global business units, don’t forget to
give your potential team members’ soft skills su cient consideration. E ective category management
requires a signi cant amount of collaboration, so you’ll want to choose individuals you are able to work
well with others or nd a way to support soft skill development within your team. (Here’s an article on
ve important soft skills (http://blog.deltabid.com/blog/skill-procurement-professional/) all procurement
professionals should have.)

Summary
The strategic sourcing process is continuous one that runs over a space of months and years. No
category manager can or should run the process alone. If you’ve read through the whole strategic
sourcing guide, you’ve probably come to see who it requires individuals with multiple areas of expertise
running a number of simultaneous activities. It requires a lot of patience to analyze and dive deep into
your data. Better solutions and ideas develop when you set up a framework for discussing and sharing
ideas and addressing concerns with the team. A strong team is a necessary asset to any successful
strategic sourcing process.

Don’t forget to share this guide with your colleagues!


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Written by Peep Tomingas (https://www.deltabid.com/blog/author/peeptomingas/)

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