4. Strategic Sourcing is Evolving Adapted from FreeMarkets Supply Evolution Traditional Purchasing Strategic Sourcing Global Supply Management Cross-functional teams Global Commodity Teams, Center-led or centralized Decentralized Buyers People Technology enablement across all strategic sourcing processes Auctions, eSourcing, Basic optimization Spreadsheets Technology Global; Highly collaborative across the enterprise and visible at executive levels Multi-regional, Some collaboration with related functions Local; Many suppliers Reach Balancing Total System Cost; Maximizing shareholder value; Enabling product innovation Supplier rationalization, Spend consolidation, Cycle-time reduction, Standardization Price, Transaction management, Compliance Focus Enablement Project Transaction Paradigm
5. Procurement Organization is Changing Center-Led is becoming the norm, and large companies are leading the charge. Decide where YOUR client is… Center-Led Procurement , Aberdeen, November 2005 A Model of Effectiveness , Procurement Strategy Council, 2004
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7. Strategic Sourcing Drives Value Areas that procurement has not tapped are prime savings opportunities Source: Procurement Strategy Council, 2004 Percent of Respondents Estimated Savings as a % of Spend
8. Strategic Sourcing Process Analyze Spend Identify Requirements Analyze Market Implement Strategy Manage Negotiations Award & Contract Develop Strategy Traditional Procurement Strategic Sourcing
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16. Methods & Tools of Strategic Sourcing An online bidding event where multiple suppliers are invited to compete in a small time window (e.g. one hour) for the best price on a product or service. Other factors are assessed in addition to the auction outcome before the award. Reverse Auction (always electronic) Buyers use a combination of RFI and RFP to ask questions about the company, the market, the service and the products, as well as obtain price quotes. Request for Proposal (RFP) (electronic or paper-based) Buyers use this when they know exactly what they want and they have qualified the suppliers that are quoting. Request for Quotation (RFQ) (electronic or paper-based) Buyers use this when they need more information about the suppliers and product or service offerings, before they can determine requirements for a price quote. Request for Information (RFI) (electronic or paper-based)
17. Determining the Negotiation Strategy Value Complexity Low High High Auction RFP Auction RFP Renegotiate RFP Few suppliers Complex Pricing Complex Services Many suppliers Transaction based Clear Requirements Many suppliers High volume Single source of supply Proprietary products Complex Pricing Partner Strategic Suppliers
18. Technology Is Growing Across Procurement Use technology to your advantage by understanding and embracing it. Spend Analysis KPI Reporting PO, Receipt, Invoice generation and handling eProcurement Content acquisition Catalog maintenance Online contract management Supplier Performance eCollaboration RFPs and negotiations Online reverse auctions Procurement Intelligence Operational Procurement Catalog Management Contract & Supplier Management Strategic Sourcing
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