Opening comments on Genral Purchasing benchmark measures leading to discussion on Strategic Sourcing

1. AWS Global
Strategic Sourcing Session
Purchasing Benchmarks
and Call to Action
Presented as Opening remarks to
Purchasing Global Perspective Meeting
Bill Kohnen

2. Numbers
• Purchase cost make up 50% or more of
revenue of most corporations
• Less than 2% of Organization is dedicated to
Purchasing and 80% of their time is
transaction focused.
• Best practice benchmarks suggest 1000 is
optimum number of suppliers and many
organizations have 5 to 10 times this

3. Numbers
• 90% of suppliers make up only 20% of spend
• Each 5% reduction in supply base equates to
1% to 2% overall savings
• 20 to 30 % cost savings achievable by
reviewing demand and specifications with
users
• Biggest cost impact potential is at need
identification stage 50% plus

4. Numbers
• Acquisition cost is just portion of total cost
– For goods 45%
– For Services 60%

5. Action and Goals
Overall Plans
• Manage Purchased materials and services to
obtain best total cost
• Drive Supplier improvement for Quality,
Logistics, Usage
• Incorporate Supplier expertise for continuous
improvement and business development

6. Session Focus – Strategic Sourcing
• Market Analysis
– Porter Model
• Cost Modeling
• Sourcing Methodology
• Organization and Team
– Size
– Skills
– Goals