CPSM3 Strategic Sourcing
Electronic Data Interchange (EDI)
A computer-to-computer transfer of info and documentation between firms. It was first developed between 1969 and 1975 for the rail industry and later adopted by the motor carrier industry
Cost Regression Analysis
A statistical "should price" method to identify savings opportunities in complex categories
Horizontal E-Market
Family of items like office supplies
Strategic Sourcing Format
Focus: name and description of service/commodity Demand: Company demand for this today, in future? Demand in the industry? Pricing: How is price affected by supply, demand and market conditions? Pricing structure? Availability:What company supplies service/commodity? How do they rank what are capabilities? End Use: What is companies end use and what are other end uses of commodity? Process: How is service designed, produced or manufacture by current supplier? Environmental: what environmental issues have effect on commodity? Buying Strategy: How is service/commodity purchased and what is the buying goal (forward buying, consignment etc?) Implementation: Follow up and review, how often?
Leverage
volume Reduce transaction costs Standardization
What should be established at the start of a project?
Steering committee
Opportunity Assessment steps
1. Spend Analysis 2. Cost Analysis (TCO) 3. Risk Analysis 4. Market Analysis (monopoly, oligopoly etc)
Procedures for Managing an online event
1. Create the category profile 2. Generate supplier profiles 3. Develop the sourcing strategy 4. select the implementation path 5. Procedures for online reverse auction
Procedures for online reverse auction
1. Determine the RFP questions or establish auction parameters 2. Develop the event on a web-based tool 3. Capture stakeholder feedback 4. Invite pre qualified suppliers to participate 5. For an auction, add initial supplier bids 6. Schedule and host training with team members 7. Schedule and host training with team members 8. Schedule and host training with suppliers 9. Distribute confidential usernames and passwords to all supplier participants 10. Conduct a practice auction and provide additional training if needed 11. Open live event
Spend Analysis
1. Develop a category tree 2. Align spend with category tree 3. Refresh data regularly 4. Utilize data for sourcing
Strategic Sourcing Procedures
1. Regression Analysis 2. Processes to disseminate and communicate the policy and procedure 3. Technology and application tools 4. Analytical skills 5. Sourcing related technologies 6. Change management skills- managing change
Most common standard for EDI?
ANSI X.12
Category Tree
Aligns with both the supply needs of an organization and supply markets , and not necessarily align with organizational structure. Ideally, the structure will ink all spend relevant to a single supply base so this spend can be identifies for sourcing to maximize leverage with suppliers
Onshoring/Reshoring/Backshoring
Bringing jobs back to country of origin (US)- this is generally manufacturing
Vertical E-Market
Buying something highly specialized; paper, steel (on a grading association)
Regression Analysis
Can be used to relate how characteristics of a product or service relate to the price and may be helpful in price-negotiating. May be used to help reduce the number of items that a supplier must be on- by using sampling Can be used to determine "should cost"
Variable Costs
Costs of goods sold (materials, labor/wages, direct overhead)
Contemporary e-sourcing tools
Electronic Data Interchange (EDI) Reverse Auctions Vertical E-market Horizontal E-Market
Strategic
Long-term Single or soul sources Limited global sourcing Supplier developmentStrate
Advantages of International Sourcing
Low costs vs. high costs Innovation Expansion
Critical Items
MRO supplies Bottleneck
Tactical
Office Supplies/Operational Non critical Streamline acquisition process Minimize transactions
Internal Strategies
Operational Strategies Financial Strategies Marketing Strategies Supply Strategies
Stakeholder
Person(s) with vested interest in something: those who will be affected by and/or can influence a decision-making process. At corporate level stakeholders are management, employees, stockholders, customers etc
Benefits of Reverse Auction
Price transparency Price validity Price compression Real-time supplier evaluation
Steering Committee
Purpose is to develop an effective executive partnership. The key to succeed in projects is an excellent two-way communication with key executives and to achieve a clear commitment to the project objectives and outcomes. Develop effective partnership and enhance communication
Disadvantages of International Sourcing
Quality Security Politics Lag/Lead time
EDI enhances productivity by
Reducing paperwork Improving supplier relationships Improving information management Reducing processing costs
Reverse Auctions
Refers to a fixed duration bidding event hosted by a single buyer, in which multiple pre qualified and invited suppliers compete for business. Potential suppliers review the requirements, choose to bid and enter their selling prices. Suppliers prices are visible to competitors, often resulting in successfully lower bids (aka reverse because driving price down.)
Loss leader
Selling something below costs
Market analysis for selection of appropriate e-solutions
Solution coverage Organizational needs Supplier types
Pay for variable costs first
The remaining portion per unit is initially a contribution to fixed costs until the break-even point is achieved. Above the break-even point, the contribution per unit is made to profit.
Breakeven
Where revenue = total costs