Basic Strategic Sourcing Process with brief discussion of benefits and requirements.

1. Basic Process Steps
Bill Kohnen

2.  Continuously improves and evaluates the
purchasing activities of a company
 Is a professional and disciplined process that
always produces total cost savings
 Requires no capital investment
 Operations aspects (salaries, travel, etc) pay
for themselves
 Effective use of Web based information and
tools streamline process

3.  Focus of this presentation is the Process
however important to the ultimate success is:
◦ Skills of Strategic Sourcing Team
◦ Organizational commitment
◦ Effective utilization of resources
◦ Knowledge of emerging trends such as
 Syndicated Commerce
 Customer centric commerce process
 Integration of ‘Big Data” tools into process
 Improving ease of use to improve compliance

4. Profile
Spend
Develop
Merchant
Management
Sourcing
Strategy
Survey
Implementation
market
Negotiation
and
Selection

5. Understand everything about the
spend category as the first step in the
strategic sourcing process.
• Defining the category and
commodities in it.
• Volume or quantity used, types and
sizes.
• Who are the users,
• Where are they located,
• What are the processes used and
• Who else is involved in the supply
chain.
Data documented in as much detail as
possible as changes may be needed.

6. • Identify potential new global and
local suppliers.
• Study the cost components of the
product or service,
• Analyze the suppliers’ marketplace
for risks and opportunities.
Key raw material prices and other
variables such as labor and
transportation must be priced and
calculations done of the suppliers’ cost
elements.

7. Deciding where to buy while
minimizing risk and costs is how you
develop the strategic sourcing
strategy. Using a cross functional
project team is a must. The strategy
will depend on what real alternatives
there are to the current suppliers, how
competitive the supplier marketplace is
and importantly, how open the users
are to new suppliers.

8. • The first round of the negotiation
process conducted with many
suppliers
• Reducing the bids to the valid ones
asking for clarifications and more
detail
• Multiple rounds of negotiations to get
to a short list.
• The final selection is usually done by
the team and signed off as per the
approval process.

9. • Notify the successful suppliers
• Ensure successful suppliers are
involved in the implementation
process.
• Develop communication to include:
• improvement to specifications
or process
• changes in delivery or service
requirements
• Changes in pricing.

10. • Start of a continuous cycle
• benchmarking the current status of
the commodity or category,
• monitoring the results
• ensuring that full value is being
achieved.
Back to Step 1 to review the supply
market again and restart the process in
a constantly evolving marketplace
Profile Spend
Develop
Merchant
Sourcing
Management
Strategy
Survey
Implementation
marketplace
Negotiations
and Selection