Post on 31-Mar-2018
Purpose
University and professional level training presentation, including real-world examples, on how to run a successful sourcing project for buying goods and services
Sourcing project steps
1. Make plan
2. Gather data
3. Assemble team
4. Survey customers
5. Set criteria
6. RFx event
7. Analysis
8. Negotiation
9. Recap & approval
10. Award & announce
11. Implementation
12. Monitor & grow
1. Make project plan
� Project timeline
� Keep it simple - not a detailed plan
� Expect 3 months to implementation
� Like this, project plan example
Spend Catagory: Industrial Supplies = Plan
Benefits: Aggregate spend
Cost Improvement: $200,000 Objective(s) Resoponsibility
1 Make plan Buyer X2 Gather data Buyer X X3 Assemble team Team X4 Survey customers Team
5 Set criteria Team
6 RFx Event Buyer/Supplier
7 Analysis Team
8 Negotiation Buyer/Supplier
9 Recap & approval Buyer
10 Award & announce Buyer
11 Implementation Supplier/Team
12 Monitor & grow Supplier/Team
Sourcing Project Plan
Jan Feb Mar
M O N T H S
X = Actual
2. Gather data
� Commodity spend data by location
� Supplier data
� Market data
� Specifications, requirements, and statements of work
� Usage forecast
3. Assemble team
� Depends on organization’s culture
� Include customer representative
� Include experts from functional areas,such as: engineering, manufacturing, finance, quality
� Get support and buy-in
� Get management sanction
� Keep team involved and informed
4. Survey customers
� Identify internal & external customers
� Use a simple email survey AND
� Talk it over in person or by phone
� Summarize results
5. Set evaluation criteria
� Use customer survey results
� Categories to include� Quality
� Service
� Price and total cost
� Social Responsibility
� Implementation plan
� Use a simple rating system
� Like this, rating example
Criteria Supplier A Supplier B Supplier C Supplier D A B C D
1. Company Overview 1 4 2 3
Total sales details details details details
Sales to our company
National Accounts
Customers lost
Account Management
Credit Report
2. Distribution &
Customer Service
2 1 3 4
Branches
Distribution Centers
On time fill rate
On time guarantee
Delivery method
24/7 service
Quote turnaround
3. Pricing 3 4 1 2
Catalog price
Discount price
National (USD)
Protection
Hold Firm
Cost Savings Target
% Savings (vs LPP)
Open Book
Gross Margin
4. Terms & Conditions 4 3 2 1
Payment Terms
Freight Terms
RATINGS
SOURCING EVALUATION
6. RFx Events
� RFI – Request For Information
� RFQ – Request For Quote
� RFP – Request For Proposal
� Sealed Bids
� Reverse Auction
� Supplier meetings and visits
� Consider ethical issues, examples
6. RFx Events – ethical issues
� All suppliers get same information at same time with same due dates
� Due date extensions for one supplier are given to all
� Questions from one supplier are answered to all
� Keep supplier prices and info confidential
� Honor commitments even if others do not
� Use good judgment
7. Analysis
� Evaluation criteria ranking
� Price & total cost – apples to apples
� Normalize for currency, unit of measure, terms, intangibles, etc
� Synthetic bid analysis
� Analysis and negotiations are iterative
8. Negotiations
� Strategy - understand balance of power
� Separate the people from the problem
� Focus on interests not positions
� Invent options for mutual gain
� Use objective criteria, indexes
� Unconditionally constructive� Both good for us & good for relationship
� Know your BATNA� Best Alternative To a Negotiated Agreement
� Analysis and negotiations are iterative
9. Recap and approval
� Prepare quote recap for management approval, keep it simple
� Include one page executive summary
� Make sure key stakeholders are involved
� Get support to clear roadblocks to implementation
9. Recap and approval – tips
� Look for a natural business fit
� Don’t make supplier into something they’re not
� Get agreement with one level of management at a time, working your way up
� Document identified cost savings, even if project is not approved for implementation
10. Award and announce
� After management approval, award business
� Finalize terms and supplier performance metrics
� Notify suppliers not awarded & provide constructive feedback
� Announce sourcing decision internally, using executive summary
11. Implementation
� After announcement, execute the implementation plan
� Include face time with supplier and customer groups
� Look to clear roadblocks
� Finalize legal contract, if required
12. Monitor and grow program
� Set periodic program reviews
� Review agreed supplier performance metrics
� Identify and correct problem areas
� Capitalize on strengths
� Keep key stakeholders informed and satisfied
� Maintain contract administration, if required
� Be your supplier’s best customer
� Have fun with it!
Conclusion
� There’s a lot to consider
� There’s a lot to be gained – in most companies 60 – 80% of cost are for purchased goods and services
� Key to success � buy in
Resources and References
Getting to Yes – Roger Fisher and William Ury
Getting Together – Roger Fisher and Scott Brown
Institute for Supply Management website www.ism.ws
ISM-Nashville website www.ismnashville.com
Resources and References cont
ISM Principles and Standards of Ethical Supply Management Conduct
� Principles� Integrity in Your Decisions and Actions
� Value for Your Employer
� Loyalty to Your Profession
� Standards� Perceived Impropriety
� Conflicts of Interest
� Issues of Influence
� Responsibilities to Your Employer
� Supplier and Customer Relationships
� Sustainability and Social Responsibility
� Confidential and Proprietary Information.
� Reciprocity
� Applicable Laws, Regulations and Trade Agreements
� Professional Competence
Resources and References cont
ISM Principles of Sustainability and Social Responsibility
� Community
� Diversity and Inclusiveness — Supply Base
� Diversity and Inclusiveness — Workforce
� Environment
� Ethics and Business Conduct
� Financial Responsibility
� Human Rights
� Health and Safety
� Sustainability
About Brian Fleming, CPSM
� Certified Professional in Supply Management (CPSM) by Institute for Supply Management (ISM)
� President, ISM-Nashville, Inc.
� End-to-end purchasing and supply management experience at CTDI, Bridgestone, Nortel, GM, Ford
� MLAS Ethics – Vanderbilt
� MS Industrial Administration – Purdue
� BS Quantitative Business Analysis – Western Kentucky
� Guest speaker – MTSU & TSU