7 Step Strategic Sourcing

Framework

Introduction

Key to successful Implementation

7 Step Sourcing Process

Index

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

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

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

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

1. Develop Category Profile

Develop Sourcing Strategy

Step 2

2. Develop Sourcing Strategy

LeverageUse competitive marketplace to reduce cost

Consolidate Volume as a negotiation tool

StrategicEnsure availability of supply

Focus on relationship building

Process integration and innovation

Non- CriticalSimplify and streamline purchasing process

Reduce No of suppliers and simplify ordering

BottleneckSearch for alternatives

Strengthen relationships

Category Positioning

Matrix

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

Generate Supplier Portfolio

Step 3

Widening of supplier base

Look beyond incumbents & their competition

Develop criteria for supplier selection

3. Generate Supplier Portfolio

Early Supplier Involvement

Request for Quotation – RFQ

Internet Negotiation – Reverse Auctioning

4. Select Implementation plan

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

Preparing the contract

Raising the PO

Blanket

Blank Check PO

System Contracting

Purchase Credit Card

6. Implement Agreements

Supplier Performance Management

Value analysis

Progressive accurate Budgeting

Target Costing

Benchmarking with competitors

7. Continuous Improvement

Thank You