Strategic Sourcing-Part 3

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Hey, welcome to part 3 of Strategic Sourcing. To this point, we've covered four of the seven steps and
now we're going to cover the last three.
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So now we're finally going to go ahead and go through a process. Let's select the suppliers we want to
do business with. We identify potential, how we're going to go about it, whether we're going to get bids
or negotiate, I talked about that before. You've gotten these proposals back in. You evaluated those
proposals. You're going to develop a negotiation strategy which we're going to talk about in in course
six. And so at the end of the day what you've really done is you've finally selected the suppliers that you
want to do business with and you're going to move forward and negotiate the final contract.
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So as I said earlier, we sent out and evaluated bids. We decided in this case not to use an e-auction. And
we decided to do some competitive bidding and then also a final negotiation. And so we did finally
select the four suppliers. And we agreed, as I said earlier, to use this particular tool.
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Then you're going to implement it, right? So now you got to put a contract in place and we're going to
talk about that in course four under contract management. You're probably going to have to figure out
are you going to get the savings that you said you would,
generally there's a process usually in finance that will track the savings. And then you're going to want to
basically execute your plan.
So two deliverables here is that you're going to have a contract in place and you're going to be tracking
savings.
So we did, we put a three-year contract in place. We should have our four suppliers as I said. All
suppliers agreed to use this e-print solution that'll create a lot of efficiency and effectiveness for
everybody. It was very quick you put your requirements into the system and in a very quick basis, one of
the four suppliers come back, you picked one of the four, usually based on price but also quality and
delivery and turnaround time and it was very very efficient.
So, how did we do from a tracking perspective?
Well, we saved over 40%. Now that's a large number but it's because this has never been through a
strategic sourcing process. If you had a mature item, you're not going to save 40%. But this is one that
the business quite frankly had never really looked at. Everybody was surprised at this number, but I
wasn't, because I've seen it happen, back in the Mars days when I was doing indirects back then. Usually
the first time you find out what the real market is and you find out where the efficiencies and
effectiveness are. The putting in the print solution was part of that.
So lastly, you got to have some sort of continuous improvement plans, called Continuous Improvement,
also called many times Supplier Relationship Management. You want some sort of tracking mechanism,
are they delivering the stuff on time, is the quality good, you want to make sure you have the contract,
make sure you're adhering to what you said you would in volumes, the split between the four vendors
and obviously you want to track that cost savings. So the deliverables here is obviously performance
reports and supplier ratings, which I'll show you in a minute. And making sure you get the savings that
you have and the contract is being complied with by us and by them.
So you probably want to set up something looking like this in your systems. Now, this may be a little bit
an overkill for print material. But to be honest with you, you're going to want the categories are
probably pretty pretty accurate. You're going to know about the delivery. Does he deliver and on time?
You can rate the supplier basically on a scale of 1 to 5. How's the quality, any quality problems? Again,
subjectively you could put surveys out to rate how well the stakeholders in the business thought the
quality was. Competitiveness, through the system you can keep track of who's been competitive and are
they getting the right share of business on an ongoing basis? You might have service factors, particularly
if you're servicing something in manufacturing about do they resolve problems quickly? Do they have a
corrective action if there's a problem? Probably not too much in the printed area, but certainly in a raw
material or packaging item for a plant would be important. So you can see here this is just for one
supplier, 3.55, other suppliers might be a 4, another supplier might be a 3. But now you have a way to
monitor this and make decisions over time about do you keep the same supplier base or do you get a
new one.
So those were the last three steps in the proposal and again, you can see we've engaged our
stakeholders throughout it. And I think if you walk through this whole area, I think you can find that this
thing is very disciplined, from the first step all the way through the seventh. So here it is again, and I'm
not going to go through it because you can go back through the slides yourself. But the idea is you go
through a very disciplined process through seven steps and you engage your stakeholders throughout
the process.
So what are some of the key take-aways?
Well, hopefully I made the case to you that the main purpose of strategic sourcing strategy is to create
value for your firm, that can be cost can be other efficiency and effectiveness and it can be increasing
revenue. Whatever it may be. I think the important thing is that you want to be able to stick to this
process. You may not have to do every single one, every time, but you can say do I want to do this, do I
want to do that, but follow the process, why? Because it works. And it makes you think about these
things where you may not stop and think about it if you're in a hurry to issue a contract. And lastly
hopefully I made the point that it's important in procurement, as I said, to be successful, but it's also
important to your stakeholders. So the bottom line is it works. The bottom line it creates value. The
bottom line is it saves money. And bottom line that it builds stakeholders and builds strong relationships
with your suppliers and your stakeholders in the business. So that's it for course 3.

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Play video starting at ::12 and follow transcript0:12

Play video starting at ::52 and follow transcript0:52

Play video starting at :1:17 and follow transcript1:17

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So, how did we do from a tracking perspective?

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So what are some of the key take-aways?

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