Revisiting The Core Principles Of Strategic Sourcing
The Hackett GroupThe Hackett GroupRevisiting the Core Principles of StrategicSourcing: Best Practices for SuccessApril 26-27, 2017
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Kurt Albertson, Principal – Procurement AdvisoryKurt Albertson is a Principal with The Hackett Group with program responsibility for NorthAmerican Strategic Advisory programs focusing on client relationships, businessdevelopment, research and program delivery. Mr. Albertson works with over one hundredGlobal 1000 companies leveraging research and thought leadership to provide strategicdirection and best practice business advice within Procurement and Finance.Prior to joining the Hackett Group Mr. Albertson spent six years as a managementconsultant in Sourcing and Procurement during which he worked with executives fromdozens of large corporations on sourcing, business and technical strategies,organizational and business process design, and cultural change.Mr. Albertson also has five years of automotive experience working in manufacturing,quality, and operations. In this role he designed and implemented global manufacturingprocesses and supervised production operations.Mr. Albertson has been quoted in the Wall Street Journal and other major publications,has been the key note speaker at many national events, and travels globally to supportclient objectives.Contact .com 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 3
Session objectives Review the core steps of the strategic sourcing process and deliverables Review some of the critical enablers for success Understand the key tools associated with strategic sourcing and areview on how to apply TCO and Porter’s Analysis 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 4
Procurement’s StrategicSourcing Process
Definition of strategic sourcingStrategic sourcing is an approach to supply chain management thatformalizes the way information is gathered and used so that anorganization can leverage its consolidated purchasing power to find thebest possible values in the marketplace.Source: whatis.com 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.2016 Enterprise Key Issues -PR6
Top ten priorities for state procurement in 2017 - NASPO1. Strategic role of state central procurement2. Procurement workforce professionalization3. E-procurement/ ERP solutions4. Measuring performance5. Effective sourcing strategies6. Staffing and talent management strategies7. Information technology8. Contract management9. Cooperative purchasing10. Procurement reform and state-wide centralization 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.2016 Enterprise Key Issues -PR7
For Procurement organizations there’s room to be morestrategic in their sourcing approachHow strategic is your strategic sourcing process?Truly strategic; we create business advantage through3% category management, innovation support, and beyondVery well implemented; onlya few opportunities remain,2%and they're outside our sphereof control2% We don't have a strategic sourcing processTactical at best (e.g., reactive late-stage negotiations)10%5%53%25%Good n-step sourcing process on paper,but biased to easy savings and shortcutsPockets of excellence, but no standardizedprocess. Multiple approaches andtemplates/tools.Well-implemented for many categories, but notpushing boundaries in demand mgmt, complexcategories, globalization, and extended supply chain 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 8
What occurs within 7 stages of procurement’s strategicsourcing approachS1NeedIdentificationYou receive arequisitionand/or a requestfor product orserviceMeet with EndUser to gatherinformationDecide onspecificcategory (IT,Goods, orSpecialServices)S2PreSolicitationDeciding onwhichPurchasingMethodologyto useConsideringthe number ofcontractrenewals touseDeterminewhichSolicitationTool that willbe ptance pmentof SourcingStrategyConductPre-Bid and/orSite VisitsConsiderIssue Notice ofReciprocalIntent AwardPreference Law (NOIA)Decidingwhether to usePosting of BidOpen or FixedContractReviewReview Order ntsDeterminePosting TimelineHandleProtest(s)S7ContractComplete ContractAssessment andSupplierPerformanceReportRenewal of existingcontractSolicitation hasclosed, noadditionalbids/proposalswill be acceptedDocument andstoreCreate contractcontract/purchas administration plane detailsSelect supplierto awardsolicitationIssue Notice ofAward (NOA)Sustain ResultsSource: DOAS Strategic Sourcing Process 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 9
A generic 7-step Strategic Sourcing process: Keyobjectives and Key Objective Understand Evaluateinternalspend andexternalsupplymarketprofiles anddevelopsourcingstrategy3IdentifySuppliers Establishselectioncriteria andconductsupplierassessmentKey Activities Structure & Set Sourcing PrepareMobilizeSourcingTeam ProfileDemand ProfileSupplyMarketObjectives DevelopSourcingStrategy FinalizeSourcingStrategy &AlignStakeholdersSupplierAssessment ExecuteSupplierAssessment4EvaluateSuppliers Conduct &evaluatesupplierevaluationand finalizesourcingplan5NegotiatewithSuppliers Developnegotiationsplan & selectsupplier(s) Customize Plan/andExecuteSupplierEvaluation FinalizeSourcingPlanExecuteNegotiationsand SelectSupplier(s) Plan rs Execute Monitor Develop Establishsupplyagreement& suppliertransitionScorecards ExecuteTransitionmarket andsupplierperformanceSRMGovernance ManageSupplierPerformance AwardBusiness 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 10
A generic 7-step Strategic Sourcing process: Keydeliverables1ProfileCategoryKey Deliverables TeamMembers andStakeholdersList Work Plan DemandProfile Supply Profile Draft CostModel SWOTAnalysis InitialSupplier List2DevelopSourcingStrategy Sourcing3IdentifySuppliers Supplier4EvaluateSuppliers SupplierStrategyAssessmentEvaluationMatrixMatrix RiskAssessment Prerequisite SupplierSupplierEvaluationDocumentation Package Supplier UpdatedAssessmentCost ModelPackage Sourcing EvaluationPlanSupplier List rs6TransitionSuppliers Draft Tenets Supplierof Agreement Scorecards(TOA) Finalized Negotiation TransitionPlanPlan Finalized KeyTOALearningsReport DraftTransitionPlan BusinessAward Plan StakeholdersApprovalChecklist SignedSupplyContracts 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.7ManageSuppliers SupplierManagementPlanBusiness Advisory Services 11
We spend the bulk of our time in defining requirements,evaluating suppliers and negotiating contractsDistribution of time spent across sourcing processes:16%Requirements definitionDevelopment of sourcing strategy/documents13%6%Supplier identification/discovery9%Supplier qualification19%Supplier evaluation and selection6%6%Supplier regulatory/risk assessmentContract creation19%Contract negotiation6%Contract approval and signature 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 12
Critical Enablers of theStrategic SourcingProcess
While strategic sourcing skills are critical the most widelyneeded skills in procurement are business skillsCritical procurement skillsGENERAL BUSINESS SKILLPROCUREMENT-SPECIFIC SKILLRelationship management and interpersonalStrategic sourcing process expertiseBusiness Skillsare generallymore transferableacross functionsand roles whileProcurementskills tend to bemore relevant toProcurement andrelated rolesProblem-solvingStrategic thinking and analysisSpecific supply market/commodity expertiseBusiness acumenSRM expertiseGroup collaboration/facilitationOrganizational know-howScale:Low A critical skill for 25% of positionsMedium A critical skill for 25-50% of positionsHigh A critical skill for 51-100% of positionsData analysis and modelingLowMediumHighSource: Skills and Talent Outlook, The Hackett Group, 2014 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 14
To be viewed by stakeholders as more strategic (e.g. trustedadvisor) we need well developed category strategiesCapabilities that will help the most to achieve a Trusted Advisor statusSource: Key Issues Study, The Hackett Group, 2016 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 15
Working cross-functionally is an important enabler for thestrategic sourcing process Strategic Sourcing Cross-Functional Stakeholders Research & DevelopmentSenior ManagementSourcing & Procurement Operations MarketingFinance Supplier DiversityLegalCore Team Team Lead: Responsible for the day-to-daydirection of and involvement in all stages ofSourcing Team Team Member: Responsible for representing keystakeholder interestsStrategic Sourcing Team MemberSMESponsorship & Subject Matter Experts (SME) Sponsor: Responsible for general oversight ofstrategic sourcing process.Operations SME: Responsible for providing expert level input(e.g., legal, quality, operations, etc.) as requestedby the Sourcing Team. 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.MemberMemberSMESMEFinance &LegalResearch &DevelopmentBusiness Advisory Services 16
What is the relevance of Crowdsourcing within thestrategic sourcing process?In 1906 there was a county fair whereattendees were invited to guess the weight ofa large ox. Excited at the chance to win thecash prize, over 800 people took aguess. Not one guess was right, butafterwards a statistician took a look at all ofthe answers and discovered somethingremarkable: the average of all the guesseswas 1 pound less than the actual weight ofthe ox. The take away: a crowd can bemuch smarted than any one of its members,even if they aren't working together. 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 17
Critical Tools for Takinga Strategic Approach
Tools that help drive a successful strategic sourcing process Spend Analysis (Demand Profile) Market Analysis Strengths, Weaknesses, Opportunities, and Threats (SWOT) Total Cost of Ownership (TCO)* Risk Assessment Porters Five Forces (Quadrant Analysis)**We will walk through an exerciseThese tools build upon one another to arrive at the category strategy and are bestapplied through facilitated exercises with stakeholders 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 19
Spend analysis looks at who is buying what from whom?A spend cube is multi-dimensional view of all external vendor spend categorizedby commodity, supplier and a regional / organizational component General AccountingLedger Accounts Payable Files Historical PaymentRecords P-Card Records Functional or BusinessUnit databases Supplier invoices andsummary data Purchase Orders T/E Systems SuppliersKey ActivitiesDesired Output Clean supplier data (e.g.,IBM I.B.M. International BusinessMachines) Eliminate any redundancyor overlap of data sources Define all dimensions ofthe spend data as needed(e.g., Business Unit,Customer, Geography,Sub-Category, SourcingGroup) Establish rules to alignsource data with eachdimension of the spendcubeSub- Categories /Sourcing GroupsBuys What?Potential Data SourcesSpendCube ( ) Compile spend cube Validate spend cubeoutput with internal usersWhat sources do you use?What level of visibility do you have? 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.What? Who? From Whom?Business Advisory Services 20
Market analysis seek to understand key aspects of the externalsupply market that provides the category1. Industry Level Analysis – explores the trends, technologies,cost drivers, etc. of the supply market2. Supplier Level Analysis – identifies key and niche suppliers,profiles capabilities, strengths, and weaknesses of suppliers3. Sourcing Strategy Best Practices – document sourcingstrategy levers being used by other companies with supplymarket 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 21
ExampleIndustry Level Analysis: Higher demand for integrated facilitiesmanagement is expected to outpace overall outsourced growthGlobal Outsourced FM Market (2011) by Service TypesGlobal Outsourced FM Market (2017 (F)) by Service TypesI-FM,Global Outsourced FM Market (in Billion)All Other12%20112017 (F) 535.0Services,88%I-FM,15% 641.1All OtherServices,85%Source: Frost &Sullivan Worldwide total outsourced FM market valued at 535 billion in 2011; market expected togrow to more than 640 billion in 2017 I-FM market generated revenue of 64.2 billion in 2011, which is 12% of the totaloutsourced market. It is expected to grow to 96.2 billion in 2017.– Both mature and emerging economies will see rising demand for I-FM servicesmainly because of its high cost-savings potential– Mature economies like North America and Europe make up the major share of theglobal I-FM market and are expected to contribute more than two-third of the marketin 2017– Despite high growth rates, total contribution to global market by emerging economieslike India and China remains low*– Service providers differentiate their service offerings by providing value-addedservices like energy management* Note: See appendix for additional data on I-FM on a regional basis 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 22
ExampleSupplier Level Analysis: In-depth analysis of each major supplier ina category helps identify potential opportunities and sourcesSupplier Cost StructureSupplier Key Financial Indicators2006Rev14,045Total Cost14,0002,267 -16,1% Operating Income7,029 - 50.0%12,00010,0008,0006,0004,0002,0000RevenueLong DistanceLocal and OtherEmerging BusinessProduct Dist. & Dir. Pub.Other Cost of Service andProducts3,158 -22.5%1,591 -11.3%Selling & GenAdminDep .2)395.31,183.8199.5AssetsReturn on AssetsReturn on EquityReturn on 5109.96170.97Operating )32.6939.8822.0Stock price per shareKey Business Issues High level of customer defectionPoor integration of XConsolidation of industry players% Change12,765.17,277.44,719.401,148.0(379.7)Net IncomeExp11,778200710.014.19.5Geographical ScopeNationwide and 290countries worldwide 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 23
ExampleSourcing Strategy Best Practices: Examine the practices that otherorganizations have leveraged to deliver value in the category Development of long-term collaborative relationship with facility serviceproviders to reduce cost The degree of integration with service provider should depend on thecomplexity of services, not on the volume of purchase Rationalize unnecessary service requirements for cost savings Leverage suppliers that are able to service the entire enterprise toreceive favorable pricing Establish Key Performance Indicators (KPIs) to manage overtime paidand productivity levels Perform predictive modeling to forecast and plan for events, ensuringbudgeting executionSource: The Hackett Best Practices 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 24
A Strengths, Weakness, Opportunities and Threats (SWOT)analysis helps uncover potential value levers around the categoryInternal(Within the Buyer)External(Outside the Buyer)StrengthsOpportunities Buyer characteristics that create orenhance the Buyer’s power in themarketWeaknesses Buyer shortcomings that reduce oreliminate the Buyer’s power in themarket External market influences thatpresent a potential benefit to theBuyerThreats External market influences that posea risk to the BuyerFacilitate a discussion with stakeholders around their perspectives for each of thefour areas and then think about how strategy will leverage 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.Business Advisory Services 25
Total cost of ownership analysis models all relevant costsassociated with a sourcing decision for a material or service Supplier Price and Terms- Unit price charged by a supplier to create amaterial or service ready for delivery andtransaction terms for payment Delivery Costs- Cost to deliver a completed material or service toits internal point of use Operations and Quality Costs- Operational cost and supporting infrastructureimplications associated with purchasing a materialor service from a supplier- Quality cost implications of purchasing a materialor service from a supplier Other Costs- Miscellaneous standard and situational costsassociated with purchasing a material or servicefrom a supplierTotal Cost of OwnershipSupplierPrice andTerms DeliveryCosts Operationsand QualityCosts Other CostsBy understanding the overall cost of a category we can align our strategy todeliver on a broad set of stakeholder business objectives 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is proh
1. Strategic role of state central procurement 2. Procurement workforce professionalization 3. E-procurement/ ERP solutions 4. Measuring performance 5. Effective sourcing strategies 6. Staffing and talent management strategies 7. Information technology 8. Contract management 9. Cooperative purchasing 10. Procurement reform and state-wide .
May 02, 2018 · D. Program Evaluation ͟The organization has provided a description of the framework for how each program will be evaluated. The framework should include all the elements below: ͟The evaluation methods are cost-effective for the organization ͟Quantitative and qualitative data is being collected (at Basics tier, data collection must have begun)
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On an exceptional basis, Member States may request UNESCO to provide thé candidates with access to thé platform so they can complète thé form by themselves. Thèse requests must be addressed to esd rize unesco. or by 15 A ril 2021 UNESCO will provide thé nomineewith accessto thé platform via their émail address.
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Dr. Sunita Bharatwal** Dr. Pawan Garga*** Abstract Customer satisfaction is derived from thè functionalities and values, a product or Service can provide. The current study aims to segregate thè dimensions of ordine Service quality and gather insights on its impact on web shopping. The trends of purchases have
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Le genou de Lucy. Odile Jacob. 1999. Coppens Y. Pré-textes. L’homme préhistorique en morceaux. Eds Odile Jacob. 2011. Costentin J., Delaveau P. Café, thé, chocolat, les bons effets sur le cerveau et pour le corps. Editions Odile Jacob. 2010. Crawford M., Marsh D. The driving force : food in human evolution and the future.
Le genou de Lucy. Odile Jacob. 1999. Coppens Y. Pré-textes. L’homme préhistorique en morceaux. Eds Odile Jacob. 2011. Costentin J., Delaveau P. Café, thé, chocolat, les bons effets sur le cerveau et pour le corps. Editions Odile Jacob. 2010. 3 Crawford M., Marsh D. The driving force : food in human evolution and the future.
