Strategic sourcing

multistep process framework

Strategic sourcing

Ten Steps
1 - Organize Sourcing Team
2 - Profile Category
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 3 - Select Sourcing Strategy
4 - Identify Supplier Portfolio
5 - Select Sourcing Process
6 - Define short-list and implement strategy
7 - Negotiate and Award Contract
8 - Implement Contract
9 - Evaluate and develop supplier
10 - Improve sourcing process

Strategic sourcing
1 - Organize sourcing team
• Cross-functional cast our net wide

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 • Cross-BU s
• Cross-Geography Global
• Consider Implementation phase by including key
influencers.
• Requires active and visible Executive Sponsorship
• Operating rules to be clarified, especially around the
decision process.

Strategic sourcing
2 - Profile category
• Requirements Analysis Specifications

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 • Spend Analysis Multi-cube Portfolio Analysis
techniques (Buyer-Supplier relative Power, enhanced
Kralgic Matrix, ATK Chessboard).
• Strategic Positioning.
• Supply Market Analysis.
• Gap Analysis.
• Start to assemble a written Strategic Sourcing Plan.
• The most time-consuming of the whole process.

Strategic sourcing
3 - Select sourcing strategy

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 • Consider all options Strategy drives tool selection;
Not the other way around.
• Risk Assessment.
• ROI of selected strategies.
• Contingency plan if necessary.
• Methodology and/or Process to be followed.
• Communication to Stakeholders and Executives.

Strategic sourcing
4 - Identify supplier portfolio
• Market Research, RFI, Internet.
• Consider all viable suppliers.
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 • Do not discard any Supplier at this stage.
• Define unbiased criteria for Supplier selection.
• Strategic fit analysis.

Strategic sourcing
5 - Select sourcing process
• Decide the most appropriate execution strategy to select
short-listed suppliers.
• RFX, Direct negotiation, e-Auctions Consider all Options.
• Define selection grid with criteria, measures and weights.
• Produce a written sourcing plan approved by Executive
Sponsor.
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 Strategic sourcing
6 - Define shortlist and implement strategy
• Deploy beforehand selected sourcing process, RFx etc •
Shortlist suppliers according to Pre-established criteria.
• Establish baseline.
• Implement previously defined strategy.

Strategic sourcing
7 - Negotiate and award contract
• Prepare negotiation team.
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 • Outline negotiation strategy to follow with suppliers.
• Set roles and objectives.
• Understand negotiating position: MDO, LAA, BATNA,
levers, possible concessions,
• Close negotiation with win-win sentiment on all parties.
• Award contract in writing, after being reviewed by Legal.

Strategic sourcing
8 - Implement contract
• Create transition plan and communicate to users.
• Involve supplier(s)
• Review processes and procedures.
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 • Review KPI s and SLA s with supplier s and stakeholders
• Initiate and maintain continuous improvement.
• Define reporting during transition and afterwards.
• Plan for emergencies Single point of contact.
• Plan and schedule contract reviews.

Strategic sourcing
9 - Evaluate and develop supplier
• Deploy a complete Supplier Relationship Enhancement
system.
• Follow-up performance metrics that have been agreed
upon Traffic light system Supplier Status
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 Supply Base Management New business
allocation.
• Identify and launch supplier development projects.
• Monitor and communicate progresses to Sourcing team
and Executive Sponsors.

Strategic sourcing
10 - Improve sourcing process
• Conduct lessons learned workshops • Plan for the next
improved sourcing exercise.
• Apply Kaizen principles.
• Review written sourcing plan and adjust if necessary.
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 Written Sourcing Plan

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 Thank you
Questions?
Next steps
https://www.jlmconsultant.com

Strategic sourcing
Key success factors
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 Jean-Louis Moreau
Procurement Consultant Interim Executive

Key success factors

Speaking with one voice
• What should or should not be communicated
• When information should be communicated
• Who should communicate information
• Who information should be communicated to
• How information should be communicated

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 Key success factors
Global transformation plan
• Strategic Sourcing is most successful when art of a
company-wide coordinated transformation plan.
• Leadership dimension

Key success factors

Cross-functional talents
• Ad hoc team members borrowed from key departments
and locations.

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 • Assignment of high potential employees to a core team
lasting 2 3 years
• Avoid captive mindset b mi ing past and future
contributors.
• Keep an eye on the implementation phase.
• Prevent erosion over time by promoting continuous
improvement.

Key success factors

Stakeholder involvement
• Identify key stakeholders early in the sourcing process.
• Invite them to participate in the sourcing effort.
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 • Communicate regularly as the sourcing project proceeds.
• Ensure final role to sign off on the negotiated results.
• Report on value created for their business.

Key success factors

Total Cost of Ownership
• Price is only one of many factors.
• TCO measures all aspects of value, price and non price
factors and other value drivers.
• Understanding all elements of TCO is a strong prerequisite
for developing an appropriate category strategy.

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 • Total Life Cycle Cost (TLCC) is even better if understood
and approved by all stakeholders.

Key success factors

Written Sourcing Plan
• If it is not written, it does not exist.
• Most valuable tool to communicate category strategy to
stakeholders and Management.
• Can be adapted to changing environment overtime.
• Provides an audit trail of key decisions.

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 Thank you
Questions?
Next steps
https://www.jlmconsultant.com

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