Service-Dominant Strategic Sourcing value creation versus cost saving

Laleh Rafati & Geert PoelsCenter for Service Intelligence

Department of Business Informatics and Operations Management

Enterprise Engineering

Enterprise Engineering (Viewing Enterprise as a System)

Teleological View(function & behavior)

Black-box Models White-box Models

Ontological View(construction & operation)

Outside –box Models

General System Theory (GST)

Modeling Approaches

Teleological View(function & behavior)

Black-box Models White-box Models

Ontological View(construction & operation)

Outside –box Models

Archimate 1.0DEMOe3valueArchimate 2.0Motivation Ext.

Business Model Canvas

Service Oriented Enterprise Engineering

Service Oriented Enterprise Engineering (Viewing Enterprise as Service System)

Teleological View(function & behavior)

Black-box Models White-box Models

Ontological View(construction & operation)

Outside –box Models

Viable Systems Approach (vSa)

Strategic Management (strategic Sourcing)

Procurement & Strategic Sourcing

- Procurement >> not a buying process- Strategic Sourcing >> not a cost function- Strategic Sourcing > > a critical area of strategic management

Strategic Sourcing as Tactical Spend Management

Define Category and Determine

Category Positioning

Determine Dependency Positioning

Identify Category’s Purchasing Strategies

Traditional steps of strategic sourcing

focus strongly on cost savings targets through applying spend analysis, supply market analyses and positioning techniques.

Complexity of Supply M

arket

Importance of Purchasing

Low

High

Low High

BOTTLENECK STRATEGIC

NON-CRITICAL LEVERAGE

High complexity/Few suppliersHigh complexity/Few suppliers

Low complexity/Many suppliersLow complexity/Many suppliers

High value/critical Items

High value/critical Items

Low value/Non-critical Items

Low value/Non-critical Items

Long-term CollaborationEnsoure Short-term Availability

Short-term Cost Leverage & Bidding

Short-term Functional Efficiency

Kraljic Purchasing Portfolio ModelFo

cus o

n 6

crite

ria o

f Por

ter’s

Fiv

e Fo

rces

Focus on Spend Cost

Buyer Pow

er

Supplier Power

Low

High

Low High

Interdependence=

Supplier Dominance<

Buyer Dominance>

Independence 0

LEVERAGE ALLIANCE

MARKET DEPENDENCY

Cox Power Portfolio Model

Focus on Performance Metrics

(Interdependence)BOTTLENECK

(Supplier Dominance)

(Buyer Dominance)(Independence)

STRATEGIC

NON-CRITICAL LEVERAGE

Strategy: Change nature of demand

4 Tactical Levers: Innovation

Breakthrough Risk Management

Technical Data Mining

Strategy: Seek joint advantage with supplier

4 Tactical Levers: Value Chain Management

Value Partnership Integrated Operation Management

Cost Partnership

Strategy: Manage Spend

4 Tactical Levers: Co-Sourcing

Commercial Data Mining Demand Management

Volum Bundling

Strategy: Leverage Competition among Suppliers

4 Tactical Levers: Tendering

Supplier Pricing Review Globalization Target Pricing

limited range of strategic sourcing options (only four sourcing strategies ‘cherry-pick’ strategic options and tactical levers from any of the quadrants;

and/or in the worst cases

Purchasing Chessboard

Strategic Sourcing as Value Driven Management

• Objective 1: Design a systemic view on strategic sourcing with emphasis on value creation to realize strategic sourcing as value driven management

• Objective 2: Develop a conceptual modeling language for the systemic exploration of strategic sourcing alternatives towards both cost saving and value creation targets

Research Approach

Way of Thinking

Way of Modeling Way of Working

Way of Supporting

Service eco-System Thinking

C.A.R.S Modeling Language and Method

Computer-aided Design Tool

Model based Analysis Approach

Seligmann et al., 1989Analyzing the structure of IS methodologies, an alternative approach

Service-Dominant Strategic Sourcing

• A systemic view on strategic sourcing emphasizes on value creation

• We propose a service ecosystem perspective for strategic sourcing as a systemic view based on the Viable Systems Approach (vSa) and Service-Dominant Logic (S-D Logic)

Strategic sourcing: a strategic process for organizing and fine-tuning the focal firm’s resources, competencies and capabilities internally and externally through A2A interactions with suppliers, buyers, internal and external customers to deliver value, in order to achieve (sustainable) competitive advantage or survivability.

C.A.R.S – a conceptual modeling language

Capability(service system)

Service

Resource base

Actor

to provide

to integrate

the configuration of

Asset(operand resource)

Competency(operant resource)

to exchange

owner

the application of

to interact

Cost Down KPIs

Value Driven KPIs

What an actor Can do

What an actor Does

Who is the resource Integrator

What an actor Has

C.A.R.S. Meta Model

Case study: Proof of Concept Demonstration

Determine Capability Positioning

Determine Dependency Positioning

Identify Capability Sourcing Strategies

C.A.R.S

Value Driven Strategic Sourcing

focus is on value-driven strategic sourcing of capabilities

Step 1: Determine capability positioning

C.A.R.S model of UZ Gent IT capabilities

Step 1: Determine capability positioning

Capability portfolio matrix of UZ Gent

Step 2: Determine (Buyer-Supplier) Dependency Positioning

C.A.R.S dependency model between UZ Gent and Agfa Healthcare

Step 2: Determine (Buyer-Supplier) Dependency Positioning

UZ Gent - Suppliers dependency matrix

Step 3: Identify capability sourcing strategies

UZ Gent capability sourcing portfolio

C.A.R.S Modeling Language 1. Focusing on procurement and strategic sourcing

2. Enabling companies to support procurement data management and analytics competencies for fact-based decision-making

3. Providing a rigorous analysis considering both cost-saving KPIs and value-driven KPIs in strategic sourcing

4. Modeling both performance-related and (strategic) functional dimensions of value chain actors (e.g. buyer, supplier and focal firm) to achieve long-term and short-term sourcing objectives

Thanks for your attention