ABLE TO FAMILAR WITH STRATEGIC IMPORTANCE OF SOURCING AND IT’S IMPACT ON SUPPLY CHAIN

1. STRATEGIC IMPORTANCE OF
SOURCING AND IT’S IMPACT ON
SUPPLY CHAIN
PREPARED BY:
Keshar Khadka -ADLSC-STEi
Quality Begins At The Source -TQM

2. Learning Objectives
To understand Basic terms in procurement and sourcing
To understand supply chain process and relation with sourcing
To Know scope of strategic sourcing in supply chain
To understand with objective of strategic sourcing
To know importance of strategic sourcing
To be familiar with decision making process in strategic
sourcing

3. Understanding Key Terms
Buy – general act of acquiring anything
Purchase – to buy product and service
Procurement – The act of obtaining or buying goods and services with buying
Efforts
Contracts – mostly services and agreements
Sourcing – act of obtaining (repeatable/ not one time activity) Global/
strategic/ outsourcing ,Sourcing manpower, information, not necessarily goods

4. INTRODUCTION
• Strategic sourcing is a process driven by an identified
goal or need and consists of........
• is an organized and collaborative approach to leveraging
targeted spend across locations with select suppliers that
are best suited to create knowledge and value in the
customer-supplier interface
• Assessing their value and relevance according to long-
term goals and overall business and supply management
objectives
• Formulating and applying action plans and processes for
critical commodities or supply networks

5. DEFINING SOURCING
What Is It?? What it Is Not??
Focused on the Total Cost of Ownership (TCO)
incorporating customer needs, organizational goals
, and market conditions
Focused ONLY on cost
Getting the best product/service at the best value Getting the cheapest product/service
Driven by a truthful and collaborative approach Ad‐hoc activities involving only
purchasing
Decisions based on fact analysis and market
intelligence
Decisions based on opinion, unjustified pr
eference, or self-satisfaction
A continuous process A one‐time project or decision

6. Well . . . . Is This Strategic Sourcing ?

7. Actually . . . . . This Is Strategic sourcing

8. Supply Chain Processes

9. A picture is better than 1000o words!!
- A supply chain consists of
Supplier Manufacturer Distributor Retailer Customer
Upstream Downstream
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10. Vertical Integration
Raw material
(suppliers)
Iron ore Silicon Farming
Backward
integration
Steel
Current
transformation
Automobiles
Integrated
circuits
Flour milling
Forward integration
Distribution
systems
Circuit boards
Finished goods
(customers) Dealers
Computers
Watches
Calculators
Baked goods
Vertical Integration Examples of Vertical Integration

11. Strategic Sourcing Scope
The scope of strategic sourcing extends beyond supplier price
negotiation and takes into account the total cost of ownership

12. Objective of Strategic Sourcing
Understanding category buying & management process to
identify improvement opportunities
Develop & implement multi‐year contracts with standardized
terms and conditions across the organization
Share best practices across the organization
control entire organization’s spend Share
Examine supplier relationships across the entire organization
Objective of strategic sourcing surrounding the reduction of cost while
maintaining and improving quality

13. Importance of Strategic Sourcing
Importance of strategic
sourcing
• Best practice sharing
• Create partnership with
supplier
• Improve operational
efficiency
• Standardise pricing
• Specification
• Increase quality
• Cost saving

14. Strategic Sourcing Process
1.Analyze
Spend
2.Identify
Requirement
3. Analyze
Market
4. Supplier
Assessment
5. Building
sourcing
strategy
6. Awards &
Contract
7. Implement
Strategy

15. Strategic Sourcing Process
 Understand spend category &
indentify requirements
• Total historic expenditure and volumes;
• Expenditure categorised by commodity
and sub-commodity;
• Expenditure by division, department or
user;
• Expenditure by supplier;
• Future demand projections or budgets.
 Supplier market assessment
• What are the conditions of the specific
market?
• Understand the key supplier marketplace
dynamics and current trends
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16. Strategic Sourcing Process
 Prepare a supplier survey
• The survey is to assess the capability and
capacity of the market to meet your
requirements
• Feasibility
• Capability
• Maturity
• Capacity
 Building the sourcing strategy
• How competitive the supplier marketplace
is?
• How supportive your organisation’s users
are to testing incumbent supplier
relationships?
• What alternatives exist to competitive
assessment

17. Strategic Sourcing Process
 Request for quotation & manage
negotiation
• This will define and make clear the
requirements to all prequalified suppliers. It
should include product or service
specifications, delivery and service
requirements, evaluation criteria, pricing
structure, and financial terms and conditions
 Selection, awards and Contracts
• Based on results, determine who the best
overall suppliers’
• Finalize specific contract terms and
conditions with suppliers
• Involve Procurement Officers , finance and
legal

18. Strategic Sourcing Process
• Implement Strategy
• Determine how the contract will be
rolled out
• identify and track the performance and
metrics
• Communicate the value t the
shareholders

19. Conclusion
• To summarize, strategic sourcing plays an important role
in the procurement cycle as it aggressively focuses on
identifying actionable insights that empower the senior
management to take well-informed decisions at the right
time, leading to accelerated cost reduction, increased cash
flow and a better ROI.