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Procurement Matters AseriesoneffectiveProcurementforProfessionals Part1:Howtosetthescopeofyoursourcingstrategy Hereisanexampleofwhat Imean... Supposeyouaregoingto marketforacleaning contracttoservicea numberofoffices.Youwill getapricewhichmay,or maynot,bebetterthanthe oneyouarecurrently paying. Ifyouaddtothescope otherfacilitiesrelated servicessuchas gardening,securityor maintenancethenyouare increasingthevalueofthe contractandsoyour leverageinthemarketplace ...butthismayhavetobe balancedbythefactthat youmaybepotentially reducingthenumberof capablesuppliers. Buthowaboutgoing further? Youmaydecidethatyou wanttooutsourcethe wholeofyourproperty management–orevensell andleasebackyour propertyportfolio.Thiswill dramaticallyincreasethe valueofthecontractand takeyouintoadifferent leagueofpotentialcost savingsbutwillalso increasethecomplexityof theprocurementandthe rangeandnumberof stakeholderswhoneedto beinvolved,adding significanttimethatis neededtoarriveata solutionthatisacceptable toeveryone. Evenifyoudecidethatthis isthescopethatyouwant, theremaybeanother alternativethataddseven morevalue. Howaboutsellingoffyour propertyportfolioand buyinginaserviceinwhich thesupplierprovidesa definedofficespaceper persontogetherwith everythingthatperson needstoperformtheirjob– heating,lighting,furniture, telephone,computerand soon.Allatacostper personbutwiththe requirementthatyoumay wanttoflexthisupordown overtimedependingon yourbusinessneeds.The onusisonthesupplierto Thescopeofyoursourcing strategydetermineswhat youcanandcan’tconsider whencreatingyour sourcingstrategy. Thescope(alongwiththe businessrequirementswe coverinthenextsection)is probablythemost importantpartofwhatyou doinpreparingasourcing strategy. Getthiswrongandthe possibilityofachievinga breakthroughresult(one whichdeliverscost reductionsof15%,20%, 30%orevenmoreandone whichdeliversimproved servicequalityand innovation)willbegreatly reduced. Thestartingpointisto decidehowtodefinethe categoryofwhatyouare sourcing.
sellsurpluscapacityinthe officebuilding. Thischangesafixedcost toavariablecostsothat yourcostsaremoreclosely alignedwithyourneeds. Eliminatingthewastethat comeswithhavingexcess officespacecanyield dramaticresults.Aswellas potentiallyreducingallof theassociatedcostssuch asfurnitureifthesupplier canbundleyour requirementswiththoseof otherclientsandgoto marketwithabigger volumethanyoucanon yourown. Otherquestionsyoucan askinordertodefinethe scopeofthestrategy includethefollowing. Arethereanygeographical boundariesthatneedtobe considered?Thismaybe theresultofsupplymarket capabilities(forexample, thetechnologyyouneedis notavailableincertain partsoftheworld)or becauseofyour sustainableprocurement strategy(forexample,not tobuyfromareasthat haveareputationfor employingchildlabour). Whattimeperiodshould thestrategycover?For example,ifthesupplierwill needtomakeaninvest- mentinequipmentinorder tofulfilthecontract,the timeperiodwillneedtobe longenoughforthemto recoverthatinvestment costandstillachieveyour pricetarget. Arethereanyorganisation- alboundariesthatyou needtoconsider?Forex- ample,partofthescope thatyouareconsidering mayalreadybecoveredby acollaborativeagreement withotherorganisations andyouarecontractually boundtohonourthis. Theoutputfromthis processofdefiningthe scopeshouldbeasimple statementofnomorethan oneortwosentences. Herearesomeexamples:-Allresidentialcarehomes inthecounty;or ITmaintenancethatin- cludesalllaptops,printers andmulti-functionaldevices; or Allgradesofboron,carbon andhighstrengthsteelsfor manufacturingplantsinEu- rope. Whatthiscleaningcontract exampleshowsisthatby consideringthecapability thatyouaresourcing insteadofthenarrow productorservicedefinition, youcangenerateoptions thatsubstantiallyincrease thevalueofthecategory. Intheexample,wedidthis bythinkingaboutthe capabilityasbeingthe managementoftheworking environment. Thisledusfromavery narrowlydefinedservice (cleaning)toproduce optionsthatinclude outsourcingthe managementofyour propertyportfolio.The resultismoreoptionsfor creatingabreakthroughin yourcostreductionplans. WantmoreTopTips? Thendownloadmyfreebooklet“57TopTipsforSourcing Strategies”bygoingto...http://academyforprocurementexcellence.com/sourcing-tips/
