The word “project” has been chosen deliberately. Most of the time what I have witnessed are ideas coming from different parts of the company, I’m referring at operations, maintenance, engineering, sales, R&D. No initiative are coming from Purchasing, only the frustration of not being involved early enough. The Pattern is actually quite similar wherever you are. The idea generator knows what is needed and what works well. He knows as well how to mitigate the risk of changing by either not changing the current supplier or by taking the one who gets a unanimous recognition. There are from my perspective six key steps to go through in order to break this paradigm that leaves to the sourcing department the role of negotiating the rebate, the payment terms or in lucky days the contract clauses.
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Let’s start first with what I think is the game changer. The information! Information about the supply market and the current and prospective spend of the given category. The goal is of course here to stimulate the interest of the demand owner. It’s up to the buyer to find out the information that would convince the user that the current solution is too expensive versus the competitors, or that its business model is a licence to print money. My suggestion as well is to manage the risk associated with the change of the supplier. One mitigation action would be to provide a safe solution for the trial – approval phase. Under these circumstances the user will feel more comfortable to conduct the change without putting herself in the line.
If this first step is a success, the second task will be to identify the decision making chain and the skills needed to run the sourcing project efficiently. This requires careful and detailed consideration as it will become the foundation of the project communication plan. The RAPID method developed by Bain consulting will enable you to pinpoint the key stakeholders within the decision making process. Without over highlighting theory around efficient team I’d like to emphasize that complementary skills are a corner stone. You will need to map out the role and responsibilities of your team members in a clear manner. This is an important step because the team composition and the role of its members will be essential for the project communication.
The third step will be the goal set up. The category goals will trace the life line of the whole sourcing category project. These goals become the reference point for every single step of the project; supply market analysis, strategy creation, RFQ bids analysis, negotiation preparation, contract clauses, supply optimization program and of course supplier performance measurement. Therefore I think that a tool addressing the whole end to end supply chain will help the project team to highlight the areas where improvements should support the company’s competitiveness. This improvements translated in figures will eventually become the category goals.
The fourth step identifies the attributes of what an attractive supplier looks like. In my opinion four dimensions must be explored;
. The supplier’s operational performance is the first one. This is actually the consolidation of supplier’s performance at different levels, from the order compliance to the strategic goals achievement through the fulfilment of the functional guarantees.
. The next one is about the supplier’s assets vs. its product life cycle which gives insights about its competitiveness. For example if the market is mature or even declining the supplier’s cost competitiveness will become a crucial criteria.
. How you are identified as a customer within the supplier’s portfolio is the third dimension. In other words are you a preferred customer or not?
. Finally is the supplier actually able to deliver what the category strategic guidelines describe? Later on we will go deeper in the supply performance optimization plan, being driven by the operational performance and the capabilities of a supplier to deliver it.
Before the last step and to be 100% ready to analyse the supply market, the buyer must have an accurate measurement data of what the expected performance is in the usual working environment. Sometimes referred to as functional guarantees, a proper sourcing tool should be able to provide the framework to collect such needs.
Finally the sixth and last step of this process is to structure and schedule the activities. An experienced project manager once said that they are three things that matter in a project management; the schedule, the performance achievement and the budget. The tool has to actually cover these three angles.
If we imagine that a buyer has been able to stimulate the interest of key stakeholders with a persuasive spend analysis and opportunity identification, such that a sourcing project has been initiated. Let’s keep considering that the same buyer has identified and engaged the key decision makers. We can now see that the project has been well received and in a good shape to proceed. If then during the project kick off meeting the same buyer manages to facilitate a process which identifies opportunities, defines performance expectations and identifies the key attributes of an attractive supplier, we would then view them as being well equipped to carry out a compelling supply market analysis.
As a reminder, a robust strategy is fueled by a deep understanding of the whole value chain. Therefore all the actions that will put the buyer in a great position to handle the market analysis will favor the creation of a winning strategy.