7 step strategic sourcing

2. 
 Introduction
 Key to successful Implementation
 7 Step Sourcing Process
Index

3. 
 7 Step Strategic Sourcing Framework is a very
popular & effective management tool
 Developed by the strategy consulting firm
ATKearney, which is consistently ranked among top
10 consulting companies in the world
 This Framework has been successfully implemented
by MNCs like P&G, HUL, IBM & DELL etc.
 Resulting in cost savings in the range of 10-20%
Introduction

4. 
 Introduce sufficient levels of competition
 Challenge the status quo
 Explore creative supply strategies
 Challenge suppliers
 Ensure that stakeholders agree to participate and
really support change
 Drive the process with heavy analysis and a solid fact
base
Key to successful
Implementation

5. 1. Develop Category Profile
2. Develop Sourcing Strategy
3. Generate Supplier Portfolio
4. Select Implementation plan
5. Negotiate & Select Suppliers
6. Implement Agreements
7. Continuous Improvement

6. 
Develop Category Profile
Step 1

7. 
 Spending Analysis
 Supply Market Analysis
 Needs Analysis- Interview key users & find out
 Their needs for the product,
 Their view of the supplier’s performance
 Any enhancements that they would like to see in the
product
 What content do you absolutely need to satisfy the
present and future requirements of your users?
1. Develop Category Profile

8. 
1. Develop Category Profile

9. 
 Supply Market Analysis using porter’s Five forces model
1. Develop Category Profile

10. 
Develop Sourcing Strategy
Step 2

11. 
2. Develop Sourcing Strategy
Leverage
Use competitive marketplace to
reduce cost
Consolidate Volume as a
negotiation tool
Strategic
Ensure availability of supply
Focus on relationship building
Process integration and innovation
Non- Critical
Simplify and streamline purchasing
process
Reduce No of suppliers and
simplify ordering
Bottleneck
Search for alternatives
Strengthen relationships
Category
Positioning
Matrix

12. Volume
Concentration
Best Price
Evaluation
•Compare ‘Total’ Cost
•Unbundle Pricing
•Model “Should Costs”
•Renegotiate Prices
•Consider Online Auction
Global
Sourcing
•Expand geographic supply
Base
•Develop New Suppliers
•Exploit global supply
imbalances
•Consolidate No of Suppliers
•Redistribute volume among
supplier
Product
Specification
Improvement
•Product Value Analysis
•Rationalize Specifications
•Substitute Materials
•Optimize Lifecycle cost
Joint Process
Improvement
•Reengineer joint
processes
•Support supplier
Operations improvement
•Integrate supply chains
Relationship
Restructuring
•Establish/develop key
suppliers
•Employ strategic
alliances/partnering
High Bargaining Power : Exercise Power Low Bargaining Power : Create Advantage

13. 
Generate Supplier Portfolio
Step 3

14. 
 Widening of supplier base
 Look beyond incumbents & their competition
 Develop criteria for supplier selection
3. Generate Supplier Portfolio

15. 
 Early Supplier Involvement
 Request for Quotation – RFQ
 Internet Negotiation – Reverse Auctioning
4. Select Implementation plan

16. 
 Negotiation Team
 Senior person
 Technical Expert
 Observer
 Negotiation Strategy
 Least acceptable agreement (LAA)
 Most desired outcome (MDO)
 Best alternative to a negotiated agreement (BATNA)
5. Negotiate & Select Suppliers

17. 
 Preparing the contract
 Raising the PO
 Blanket
 Blank Check PO
 System Contracting
 Purchase Credit Card
6. Implement Agreements

18. 
 Supplier Performance Management
 Value analysis
 Progressive accurate Budgeting
 Target Costing
 Benchmarking with competitors
7. Continuous Improvement

19. 
Thank You