New Directions in Supply Source One Management Services, LLC 724 Fitzwatertown Road Willow Grove, PA (215)

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 High VALUE RISK Office SuppliesTelephone 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 High COST/VALUE MARKET COMPLEXITY 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 Process Step 1: Internal Assessment Step 2: Supplier Market Assessment Step 3: Collect Supplier Information

Seven Step Sourcing Process Step 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 Process Step 1: Internal Assessment Step 2: Supplier Market Assessment Step 3: Collect Supplier Information Step 4: Develop Sourcing Strategy Step 5: Solicit and Evaluate Bids

Seven Step Sourcing Process Step 1: Internal Assessment Step 2: Supplier Market Assessment Step 3: Collect Supplier Information Step 4: Develop Sourcing Strategy Step 5: Solicit and Evaluate Bids Step 6: Negotiate with and Select Suppliers

Seven Step Sourcing Process Step 1: Internal Assessment Step 2: Supplier Market Assessment Step 3: Collect Supplier Information Step 4: Develop Sourcing Strategy Step 5: Solicit and Evaluate Bids Step 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