New Directions in Supply

1. New Directions in Supply Source One Management Services, LLC 724 Fitzwatertown Road Willow Grove, PA 19090 (215)-902-0200 www.sourceoneinc.com

2. Lesson 5 Developing and Implementing Supply Strategies

3. 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

4. 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

5. Risk and Value High Single Source Parts Test Projects New Sourcing Strategies RISK Office Supplies Telephone Service Working with Client (our end) Ability to Travel Network Server Low Low High VALUE

6. Low Many Suppliers Excess Capacity Standard Specs. Possible Substitutes High Few Suppliers Restricted Capacity Unique Specs. No Substitutes Market Complexity

7. Putting it Together High Critical Reduce Risk or Eliminate Altogether Strategic Supplier Partners MARKET COMPLEXITY Tactical Streamline Process • Leverage • Maximize Leverage Low High Low COST/VALUE

8. 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 Relationship Strategy

9. Chapter 6 Strategic Sourcing: • Where Did it Come From? • What Has it Accomplished? • Where is it Going?

10. Evolution of Sourcing Sourcing Has Become… • Organized • Systematic • Collaborative

11. Seven-Step Sourcing Process Step 1: Internal Assessment Step 2: Supplier Market Assessment Step 3: Collect Supplier Information

12. 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?

13. 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

14. 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

15. 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

16. Supply Competitiveness Continuum • Monopoly  Single Source  • Duopoly  Oligopoly  • Competitive  Commodity

17. 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 Value-Based Sourcing

18. Supply Management Handbook, Seventh Edition, McGraw-Hill Source One Management Services, LLC www.SourceOneInc.com Resources