Daily Archives: May 14, 2008

A Strategic Sourcing Plan Outline

I didn’t go to ISM, but I did check out some of the materials that have been appearing on the ISM site, and one abstract in particular that caught my attention was Strategic Sourcing Plans Made Easier with a Take-Away Outline by Robi Bendorf of Bendorf & Associates.

The abstract starts off by noting that the development and implementation of formal detailed strategic sourcing plans for major spend categories has been and will continue to be an essential element of top-class supply management operations – yet most supply management organizations do not have them. Noting that it is generally easier to define plans and procedures when you have a draft to start from, the abstract provides an example of a step-by-step procedure for the development of formal sourcing plans and a detailed outline of what should be in the plan.

The plan outline is worth reviewing, because it outlines what you have to think about in order to develop a good plan. At a high level, the plan outline presented is as follows:

  1. Category Description
  2. Current Business Strategy for Category Utilization
  3. Strategic Sourcing Team
  4. Category History
    • Total Annual Volume
    • Historical Price Changes
    • Lead Time History
    • Cost Improvement History
  5. Current Supplier Overview
    • Supplier Financial Data
    • Quality
    • Delivery
    • Innovation
    • Supplier Relationship
  6. Current Process Overview
    • Supplier Segmentation
    • Supply Chain Map
    • Supplier Selection
    • Contracting Method
    • Ordering Process
    • Performance Measurement
    • Inventory
  7. Supply Market Overview
    • Marketplace Suppliers
    • Marketplace Buyers
    • Competitor’s Sources
    • Market Trends
    • Major Raw Materials
    • Cost Drivers
    • Company Bargaining Power
    • Market Indexes
  8. Cost / Value Analysis
  9. Plan Objectives
    • Short Term Objectives
    • Long Term Objectives
    • Relationship to the Corporate Business Plan
  10. Implementation Strategies
  11. Action Plan

This is a great overview as it demonstrates that a lot of factors need to be considered in the formulation of a plan even at the category level. Without a thorough understanding of the category, the sourcing team will not be able to determine the appropriate cost / value tradeoff and create a supply management plan that will simultaneously achieve cost reduction and avoidance while achieving the business strategies outlined in the corporate business plan.