Index


 Introduction

 Key to successful Implementation

 7 Step Sourcing Process

 Introduction

 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%
 Key to successful
Implementation

 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
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
Develop Category Profile

Step 1
 1. Develop Category Profile


 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


 1. Develop Category Profile


 Supply Market Analysis using porter’s Five forces model
Develop Sourcing Strategy

Step 2
 2. Develop Sourcing Strategy
Leverage Strategic
Use competitive marketplace to Ensure availability of supply
reduce cost
Consolidate Volume as a
negotiation tool
 Focus on relationship building
Process integration and innovation

Category
Positioning
Matrix

Non- Critical
Bottleneck
Simplify and streamline purchasing
process Search for alternatives
Reduce No of suppliers and Strengthen relationships
simplify ordering
High Bargaining Power : Exercise Power
•Consolidate No of Suppliers
Volume
•Redistribute volume among
Concentration
supplier
•Compare ‘Total’ Cost
Best Price
•Unbundle Pricing
•Model “Should Costs”
Evaluation •Renegotiate Prices
•Consider Online Auction
•Expand geographic supply
Global
Base
•Develop New Suppliers
Sourcing •Exploit global supply
imbalances
Low Bargaining Power : Create Advantage
•Product Value Analysis
Product •Rationalize Specifications
Specification •Substitute Materials
Improvement
•Optimize Lifecycle cost
•Reengineer joint
Joint Process
processes
•Support supplier
Improvement Operations improvement
•Integrate supply chains
•Establish/develop key
Relationship
suppliers
•Employ strategic
Restructuring alliances/partnering
Generate Supplier Portfolio

Step 3
 3. Generate Supplier Portfolio


 Widening of supplier base

 Look beyond incumbents & their competition

 Develop criteria for supplier selection

 4. Select Implementation plan


 Early Supplier Involvement

 Request for Quotation – RFQ

 Internet Negotiation – Reverse Auctioning

 5. Negotiate & Select Suppliers


 Negotiation Team
 Senior person
 Technical Expert
 Observer
 Negotiation Strategy
 Least acceptable agreement (LAA)
 Most desired outcome (MDO)
 Best alternative to a negotiated agreement (BATNA)
 6. Implement Agreements


 Preparing the contract

 Raising the PO

 Blanket

 Blank Check PO

 System Contracting

 Purchase Credit Card

 7. Continuous Improvement


 Supplier Performance Management

 Value analysis

 Progressive accurate Budgeting

 Target Costing

 Benchmarking with competitors

Thank You
