New Directions in Supply

Source One Management Services, LLC724 Fitzwatertown RoadWillow Grove, PA 19090

(215)-902-0200www.sourceoneinc.com

Lesson 5

Developing and Implementing Supply

Strategies

Supply Segmentation

organizing supply strategies, tactics, and management approaches to effectively link them to overall firm goals

Segments include: Risk and Value Cost/Value Market Complexity

Risk and Value

Risk Extent of negative outcomes if

the good or service is of low quality, too expensive, or becomes unavailable

Value Usually measured in $, but could

also have intrinsic value

Risk and Value

High

Low

Low HighVALUE

RISK

Office Supplies Telephone Service

Working with Client (our end)

Ability to Travel

Network Server

Test Projects

New Sourcing Strategies

Single Source Parts

Market Complexity

Low Many Suppliers Excess Capacity Standard Specs. Possible

Substitutes

High Few Suppliers Restricted Capacity Unique Specs. No Substitutes

Putting it Together

Low

Low High

High

COST/VALUE

MA

RK

ET

CO

MP

LE

XIT

Y

Tactical

Streamline Process

Leverage

Maximize Leverage

Critical

Reduce Risk or Eliminate Altogether

Strategic

Supplier Partners

Relationship Strategy

Transaction Focus

LESS Communication Length of Contract Supplier Involvement

Appropriate For: Low Product Value Low Risk Product Low Market Complexity

Collaboration Focus

MORE Communication Length of Contract Supplier Involvement

Appropriate For: High Value Product High Risk Product High Market

Complexity

Chapter 6

Strategic Sourcing: Where Did it Come From? What Has it Accomplished? Where is it Going?

Evolution of Sourcing

Sourcing Has Become… Organized Systematic Collaborative

Seven-Step Sourcing ProcessStep 1: Internal Assessment

Step 2: Supplier Market Assessment

Step 3: Collect Supplier Information

Seven Step Sourcing ProcessStep 1: Internal Assessment

Step 2: Supplier Market Assessment

Step 3: Collect Supplier Information

Step 4: Develop Sourcing Strategy

How competitive is the supplier marketplace?

Need vs. opportunity to test incumbent relationships

Any alternatives to a competitive assessment?

Seven Step Sourcing ProcessStep 1: Internal AssessmentStep 2: Supplier Market AssessmentStep 3: Collect Supplier InformationStep 4: Develop Sourcing Strategy

Step 5: Solicit and Evaluate Bids

Seven Step Sourcing ProcessStep 1: Internal AssessmentStep 2: Supplier Market AssessmentStep 3: Collect Supplier InformationStep 4: Develop Sourcing StrategyStep 5: Solicit and Evaluate Bids

Step 6: Negotiate with and Select Suppliers

Seven Step Sourcing ProcessStep 1: Internal AssessmentStep 2: Supplier Market AssessmentStep 3: Collect Supplier InformationStep 4: Develop Sourcing StrategyStep 5: Solicit and Evaluate BidsStep 6: Negotiate with and Select Suppliers

Step 7: Implement Recommendations

Supply Competitiveness Continuum Monopoly Single Source

Duopoly Oligopoly

Competitive Commodity

Value-Based Sourcing

Traditional Sourcing

Focus on Prices

Total Cost of Ownership

Process Driven

Procurement Skills

Value-Based Sourcing

Focus on Value

Total Contribution to Ownership

Strategic Intent-Driven

Business Skills

Resources

Supply Management Handbook, Seventh Edition, McGraw-Hill

Source One Management Services, LLC www.SourceOneInc.com