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