[commodity name] commodity strategy

BPIBest Procurement Implementation

[Commodity Name] Commodity Strategy

[Name][Date]


Commodity Strategy Summary

3 eProcurement Scotl@nd

Scope:

Key Stakeholders:

Key Commodity Team Members:

Total Spend:

Target Savings:

Current Status:

Highlights – [Commodity]


Commodity Strategy Summary – [Commodity]

Topic Current Position Short / Medium Term Long-Term

Supply Base Management

Internal Demand Management and Processes

Total Cost Management

Scope: !!!!Current Spend : £!!!m Estimated

Savings : !!% – !!%


Commodity Strategy Summary – [Commodity]

Implementation Approach Timing

Issues to Overcome Owner

Role Approver / Signatory Signature

Commodity Sponsor

Strategic Sourcing Director

NPO Director

Category Manager


Strategy Recommendations for [Commodity]

RecommendationsRecommendations

xxx xxx

Potential BenefitPotential Benefit

xxx xxx


Stakeholder Map


Stakeholder map for [Commodity]

List names and contact details of all stakeholders relevant to this commodity

Name Job Title Division Contact Tel E-mail


Objective Deliverables Who to involveNB: Initial list. More may emerge

• What are the Commodity Team objectives

• xxxx

Commodity Team Charter

• What will the commodity be responsible in delivering

Scope Critical Success Factors

• Commodity Team Members plus others that may need to be involved when appropriate

Out of Scope Interdependencies


Contract Status


Current Contract Status

Contract Contract Value

Contract Start/End Dates

Comments


Business Requirements


Characteristics of [Commodity]

Scope the commodity to be covered i.e. what is included in this commodity group?, commodity characteristics, breakdown into sub-commodities, which products under which sub-commodity


Business Need and Functional Requirements

XXXXXXXXXXXX

What are our Requirements?

Where we are…Where we are…

What does the product do?, Standard vs customised, Level of customisation, Quality requirements, Real vs perceived function, Service requirements, User perception, Value to end customer, Specific specifications

What does the product do?, Standard vs customised, Level of customisation, Quality requirements, Real vs perceived function, Service requirements, User perception, Value to end customer, Specific specifications

Where we want to beWhere we want to be

xxx xxx


Expenditure Analysis


Spend Distribution

In scope Spend Distribution broken down by Dept/Service Area/Health Board, Supplier, by Sub Commodities


Future Expenditure Trends

Demand Profile


Graphs – Double Click on the Graphs to bring up an Excel imbedded table and modify accordingly

45.9 46.9 45 43.9

20.4

27.4

60

20.4

30.6

38.634.6

31.6

45.9 46.9 45 43.9

1998 1999 2000 2001

Key 1Key 2Key 3Key 4

Title for Column Graph(Units)

Title for Bar Graph(Units)

45.9

46.9

43.9

20.4

27.4

60

20.4

30.6

38.6

34.6

45.9

46.9

45

43.9

45

31.6

Category 4

Category 3

Category 2

Category 1

1998199920002001

20.427.4

61.5

15.2

30.6 38.634.6

31.6

45.9 46.9 45.1 43.9

0

25

50

75

1994 1995 1996 1997

Title for Line Graph(Units)

Title for Combination Graph(Units)

Line 3

Line 2

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1998 1999 2000 2001

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Key Key Key Key

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Note: Reduce size of numerals on charts after sizing art to fit page.


50

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Title for Pie Charta

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Title for Floating Graph(Units)

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1994 1995 1996 1997

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Title for Bubble Graph(Units)

X Axis

Y Axis

Size of Ball

Useful information for plotting bubble charts

Bubble 1Bubble 2

Bubble 3

Bubble 4

a. Pie charts start at 12.00 and build clockwise from largest to smallest (dark to light); “other” is always last no matter how big.

Label

La

be

lGraphs 2 – Double Click on the Graphs to bring up an Excel imbedded table and modify accordingly


Graphs 3

45.9 46.945 43.9

20.4

27.4

60

20.4

30.6

38.6

34.631.6

45.9 46.945 43.9

20.4

27.4

60

20.4

30.6

38.6

34.631.6

1998 1999 2000 2001

Key 1

Key 2

Key 3

Key 4

Key 5

Key 6

Title for Column Graph—Six Colours(Units)


Graphs 4

Title for Stacked Graph—Six Coloursa

(Units)

6.9 8.1 8.8

5.6

6.77.2

4.4

5.44.92.7

3.13.3

1998 1999 2000

21.6

25.527.0

Label 6Label 5

Label 4

Label 3

Label 2

Label 1

1.00.5

1.10.6 1.3

0.9

a. Progress shades from dark at bottom up to light at top.


Supply Market Analysis


Selected Sources of Market Data

Use these sources of Information (Delete Slide Information Only)

Source and Link Description

www.onesource.com The OneSource® Business Browser SM family of business information subscriptions provides robust, integrated information on public and private companies, industries & execs worldwide

www.carol.co.uk Company Annual Reports Online. Annual reports for British, US and Asian companies are available.

www.factset.com FactSet Research Systems Inc. is a provider of financial and economic information community.

www.ft.com

www.hoovers.com Hoover's, Inc. delivers company, industry, and market intelligence

www.dnb.com Dunn & Bradstreet – can be used for Risk Mgmt Solutions to manage credit exposure, D&B Sales & Marketing Solutions to find profitable customers and D&B Supply Management Solutions to manage suppliers efficiently.

www.gs.com Goldman Sachs

www.multex.com Reuters, through its Multex services, provides global broker and independent research, business information worldwide. Plus events calendar, SEC filings, market data and other third-party information.

www.factiva.com Knowledge and content mgmt and access to data – Dow Jones & Reuters company

www.equifax.co.uk Business info services and latest news, to obtaining a copy of your credit file or accessing other services

www.companieshouse.com Company information

Supply Market Analysis

More Sources of Information


Supply Market Overview

Market Trends - What is happening in the market for the commodity?, Current and future technologies, Changing customer demands New players, mergers and acquisition

Supply Market Share - Key players within the industry, Identify size in terms of turnover, sales, number of customers and capacity


SWOT analysis of the [Commodity] market

StrengthsStrengths WeaknessesWeaknesses

OpportunitiesOpportunities ThreatsThreats

• xxx

• xxx

• xxx

• xxx

• Xxx

• xxx

• xxx

• xxx


Current Suppliers of [Commodity]

Current suppliers of [Commodity Name]Current suppliers of [Commodity Name]

SupplierSupplier[Your

organisation] Spend

[Your organisation]

SpendTotal RevenueTotal Revenue Background on the SupplierBackground on the Supplier

xxxxxx

xxxxxx

xxxxxx

xxxxxx

xxx xxx

xxx xxx

xxx xxx

xxx xxx

xxx xxx

xxx xxx

xxx xxx

xxx xxx

xxx xxx

xxx xxx

xxx xxx

xxx xxx

xxxxxx xxx xxx xxx xxx xxx xxx


Porters 5 Forces Analysis [Commodity]

Threat of New EntrantsThreat of New Entrants

How profitable is the product manufactured by the supplier’s market segment?

How complex is the product specification? What is the product time to market? Are there patents / design ownership? Other?

How profitable is the product manufactured by the supplier’s market segment?

How complex is the product specification? What is the product time to market? Are there patents / design ownership? Other?

Intensity of rivalry among competitorsIntensity of rivalry among competitors

Where does the supplier stand in the industry? What are the supplier’s competitors doing in terms of

delivery? How are competitors performing in terms of

innovation?

Where does the supplier stand in the industry? What are the supplier’s competitors doing in terms of

delivery? How are competitors performing in terms of

innovation?

Pressure from SubstitutesPressure from Substitutes

Are there other products available to serve the same purpose?

How variable is the demand? How specialised is the demand? How complicated is the specification? How specialised is the product function?

Are there other products available to serve the same purpose?

How variable is the demand? How specialised is the demand? How complicated is the specification? How specialised is the product function?

Bargaining Power of SuppliersBargaining Power of Suppliers

How stable is the Tier 2 supplier of the key products?

What is the supply base (#)?

What % of total spend do they control?

How stable is the Tier 2 supplier of the key products?

What is the supply base (#)?

What % of total spend do they control?

Bargaining Power of BuyersBargaining Power of Buyers

What proportion of the supplier’s total purchases goes into the product/service?

How critical is the bought out commodity to the customer’s level of satisfaction?

Is customer pressure requiring the way business is conducted to change?

What proportion of the supplier’s total purchases goes into the product/service?

How critical is the bought out commodity to the customer’s level of satisfaction?

Is customer pressure requiring the way business is conducted to change?

LOW

HIGH

MEDIUM

Using the comments as a guideline and using market intelligence sources, develop a 5 forces view of the commodity market


Competitive positioning for [Commodity]

<Buyer Strong Supplier Strong>

Number of acceptable suppliers (From tender list) x

Capacity available from acceptable suppliers (Product range) x

Our current level of business with potential suppliers (Spend) x

Likelihood of demand growing (DMS growth) x

Substitution alternatives x

Knowledge of suppliers cost breakdown & cost drivers x

Knowledge of supplier’s pricing policies & variations x

Supply logistics (geographical/transportation considerations) (Compliance to delivery schedules) x

Attractiveness of us to supplier (Supplier Preference) x

Barriers to changing supplier (e.g. technical, standards, cost) (Cost is an internal barrier to change) x


Bu

s in

ess

Imp

act

Hig

h

LEVERAGE STRATEGIC

[Your organisation] PERSPECTIVE

Ensure long term availability of supply

Focus on relationship building and process integration with supplier

Reduce/eliminate company’s risk and exposure to price increases/supply disruption

Secure existing sources of supply and search for possible substitutes

Market Challenge High

Use competitive advantage to reduce total costs

Use enterprise-wide sourcing volumes as a negotiation tool

Simplify and streamline acquisition process to achieve efficiencies / cost reduction

Reduce number of suppliers and simplify sourcing process

LEVERAGE STRATEGIC

ROUTINE BOTTLENECK

Reduce/eliminate company’s risk and exposure to price increases/supply disruption

Secure existing sources of supply and search for possible substitutes

Ensure long term availability of supply

Focus on relationship building and process integration with supplier

Market Challenge High

ROUTINE BOTTLENECK Simplify and streamline

acquisition process to achieve efficiencies / cost reduction

Reduce number of suppliers and simplify sourcing process

Use competitive advantage to reduce total costs

Use enterprise-wide sourcing volumes as a negotiation tool

Current State Possible Future State

The current and future state relationship between [your organisation] & the supplier for [Commodity]…

Bu

s in

ess

Imp

act

Hig

h

Acc

ou

nt

attr

acti

ven

ess

H

igh

Nurture & Expand Business Seek opportunities Develop Business together

Defend vigorously expand if possible

Potential long term relationship

Exploit commercially Risk losing High Risk

Give low attention Lose without pain Change supplier Raise attractiveness

Relative Value of Business

DEVELOPMENT CORE

NUISANCE EXPLOITABLE

Relative Value of Business

DEVELOPMENT CORE

NUISANCE EXPLOITABLE

Nurture & Expand Business Seek opportunities Develop Business together

Defend vigorously expand if possible

Potential long term relationship

Give low attention Lose without pain Change supplier Raise attractiveness

Exploit commercially Risk losing High Risk

SUPPLIER PERSPECTIVE

Acc

ou

nt

attr

acti

ven

ess

H

igh


Opportunities moving towards xxxxOpportunities moving towards xxxx

xxxx xxxx

Our Organisation’s Perspective on Supplier Relationship Objectives for [Commodity]

xxxx Characteristicsxxxx Characteristics

xxxx xxxx

These opportunities will lead to result in xxxxThese opportunities will lead to result in xxxx


Opportunities moving towards DevelopmentOpportunities moving towards Development

xxx

Core CharacteristicsCore Characteristics

xxx xxx

Supplier Perspective on Relationship Objectives for [Commodity] (What does it mean for the supplier


Total Cost Model


Total Cost Model [Commodity]

List the activities carried out under each step of the product life cycle, Determine the impact of each step on the total cost of ownership in terms of High, Medium or Low, Brainstorm the cost drivers associated with the activities under each step, Determine the opportunities in each area. Which costs can be reduced (savings)/avoided (cost avoidance)?, Identify Low, Medium and High Savings Opportunities, Identify the barriers and enablers related to realising the opportunities

Raise Need Acquire / Order Use Dispose

Activities:

Impact:(on TCO )

Cost Drivers:

Savings Opportunity:

Barriers:

Enablers:


[Commodity] typical cost breakdown

Profit 10%Complete the breakdown for the commodity

xxxxxxxx

What are the recommendations

Recommendations


Strategic Positioning


Strategic Positioning of Sub-Commodities

Using blue circles, place the sub-commodities within the matrix using the comments as a guideline


Sourcing Opportunities for [Commodity]

Develop strong relationships with preferred suppliers Introduce supplier development programmes Review / establish service level agreements Establish incentivised contracts PPI/PPP contracts

Tender requirements for all spend

Open book contracts Supplier consolidation –

framework contracts

Rationalise requirements and suppliers Low value ordering systems (e.g. GPC) e-Procurement Consolidate invoices

Common specification Leverage across departments Collaboration with other public sector

bodies (eg.other local government, health care)

Implement framework agreements

Detailed specifications Lower cost specification Optimal service level Quantify spend volumes

Price / performance benchmarking Value for Money – cost vs benefits Reverse Auction Cost breakdown analysis BAFO tendering

Find alternative ways of meeting needs

Business case to include estimated savings

Eliminate need Policy changes Reduce maverick

spend Re-engineer processes Outsourcing Reduce inspection Reduce stock holding

Competitive tendering using S-CAT, G-CAT and L-CAT

OGC contracts

Design / development Integrate logistics Frameworks to remove

need for OJEU process


Risk Analysis


Risk AnalysisRisk Analysis

Description of RiskDescription of Risk

xxx xxx

Probability of RiskProbability of Risk

High / Medium / Low

High / Medium / Low

Implications to our OrganisationImplications to our Organisation

xxx xxx

xxx xxx

xxxx xxxx

High High

xxxx xxxx

Measures to Minimise / Eradicate Risk

Measures to Minimise / Eradicate Risk

xxxx xxxx

xxxx xxxx xxxx xxxx

xxxx xxxx xxxx xxxx

Risk Analysis for [Commodity]


Post Tender Clarification Plan

[Date]


Post Tender Clarification Plan [Commodity][Supplier] Date

The Objective (We need to clarify with [Supplier] to achieve the following)The Objective (We need to clarify with [Supplier] to achieve the following)

1. xx

2. xx

3. xx

4. xx

1. xx

2. xx

3. xx

4. xx

Specific GoalsSpecific Goals

Target decision-maker: Confirm who will be attending from the supplier side and

determine who will be the decision maker

Target decision-maker: Confirm who will be attending from the supplier side and

determine who will be the decision maker

Relationship background: Collate internal intelligence on previous [your organisation]

dealings with this person and assess the type of relationship he/she holds with [your organisation]

Relationship background: Collate internal intelligence on previous [your organisation]


High expectations (Most Desirable Outcome – MDO): Refer to the components of your objective statement and

determine your highest expectation from the supplier i.e. what do you expect them to offer against each objective

High expectations (Most Desirable Outcome – MDO): Refer to the components of your objective statement and

determine your highest expectation from the supplier i.e. what do you expect them to offer against each objective

Supplier High Expectation (MDO): Collate internal intelligence on previous [your organisation]


Supplier High Expectation (MDO): Collate internal intelligence on previous [your organisation]



InterestsInterests

[ your organisation]: What are your ultimate interests?, Determine which areas you

need to ensure and are not prepared to compromise and vice versa e.g. No compromise on delivery or quality to secure pricing.

[ your organisation]: What are your ultimate interests?, Determine which areas you

need to ensure and are not prepared to compromise and vice versa e.g. No compromise on delivery or quality to secure pricing.

[Supplier]: What are the suppliers’ interests? Refer to the external and

internal data collated above and determine what the suppliers’ interests might be e.g. To maintain price but offer other non-price incentives or to amend payment terms

[Supplier]: What are the suppliers’ interests? Refer to the external and

internal data collated above and determine what the suppliers’ interests might be e.g. To maintain price but offer other non-price incentives or to amend payment terms

Post Tender Clarification [Commodity][Supplier] Date


Leverage Favours Me Them About Even (Who has the most to lose from a ‘no deal’)

Leverage Favours Me Them About Even (Who has the most to lose from a ‘no deal’)

Strategies / LeverageStrategies / Leverage

Least Acceptable Agreement (LAA): The Least Acceptable Agreement (LAA) is the buyer’s bottom

line. Barring the emergence of a better option, settling for anything less than this is not a viable business proposition. This is the minimum the buyer can agree to without sacrificing our impairing interests. The buyer should never agree to any solution less than the LAA without very careful consideration of the BATNA

Least Acceptable Agreement (LAA): The Least Acceptable Agreement (LAA) is the buyer’s bottom

line. Barring the emergence of a better option, settling for anything less than this is not a viable business proposition. This is the minimum the buyer can agree to without sacrificing our impairing interests. The buyer should never agree to any solution less than the LAA without very careful consideration of the BATNA

[Supplier] LAA: xxx xxx

[Supplier] LAA: xxx xxx

Best Alternative to a Negotiated Agreement (BATNA): The Best Alternative to a Negotiated Agreement (BATNA) is the

buyer’s contingency plan if the supplier is not willing to agree, at a minimum, to the LAA. What are the alternatives in the event of a deadlock or unsuccessful agreement

Best Alternative to a Negotiated Agreement (BATNA): The Best Alternative to a Negotiated Agreement (BATNA) is the

buyer’s contingency plan if the supplier is not willing to agree, at a minimum, to the LAA. What are the alternatives in the event of a deadlock or unsuccessful agreement

[Supplier] BATNA: xxx xxx

[Supplier] BATNA: xxx xxx

Post Tender Clarification [Commodity] (Supplier] Date

Can I improve this? Steps to improve alternativesCan I improve this? Steps to improve alternatives

Can I effect their alternatives of make their status quo worse?

Can I effect their alternatives of make their status quo worse?



Possible Proposals (Tradable Variables)Possible Proposals (Tradable Variables)

Develop a list of ‘give and takes’ or tradable variables, build on shared interests, bridge conflicting interests.

1. xx

2. xx

3. xx

Develop a list of ‘give and takes’ or tradable variables, build on shared interests, bridge conflicting interests.

1. xx

2. xx

3. xx

Authoritative Standards and NormsAuthoritative Standards and NormsMineMine TheirsTheirs Counter ArgumentCounter Argument

Xx

Xx

xx

Xx

Xx

xx

Xx

Xx

xx

Xx

Xx

xx

Xx

Xx

xx

Xx

Xx

xx

Third Party MovesThird Party Moves

Can I use a third party: As Leverage, As an Excuse, As an Audience, As a Coalition partner

1. xx

2. xx

Can I use a third party: As Leverage, As an Excuse, As an Audience, As a Coalition partner

1. xx

2. xx



Situation and Strategy AnalysisSituation and Strategy Analysis

As you see itAs you see it

Transaction Relationship Balanced Concerns Tacit Coordination


As they see itAs they see it



Style AdjustmentsStyle Adjustments Their Expected StrategyTheir Expected Strategy

My basic style is ________________, so I need to be more ___________ in this situation

My basic style is ________________, so I need to be more ___________ in this situation

Competitive Problem Solving Compromise Avoiding Accommodating

Competitive Problem Solving Compromise Avoiding Accommodating

Overall Positioning ThemeOverall Positioning Theme

Develop an overall positioning statement for the negotiation e.g. ‘This is an opportunity for Supplier A to win the business. The requested pricing has been offered by other suppliers, so we believe it to be possible.’

Develop an overall positioning statement for the negotiation e.g. ‘This is an opportunity for Supplier A to win the business. The requested pricing has been offered by other suppliers, so we believe it to be possible.’


Implementation Plan

Date


Implementation Plan

Include: Savings Profile by Dept/Service Area/Health Board

Trialling process if applicable

SAP Communication Pack

Buyers Guide

Commodity Action Report (CAR)

ePS Bulletin

Sutures Example - Implementation Plan

[commodity name] commodity strategy

Documents

targeted trialling of

consultant trialling

ndsuture trialling

trialling periodconsultants

trialorder sutures

volume sutures

new sutures

trialling set dates