Strategic Sourcing Key Learning's

Process Tips

Don't take current buyer or the vendors advice relative to savings potential.

Set savings targets high. Teams tend to reach the goals set and then stop.

Electronic bill review for many commodities is critical.

Vendors

Relationships keep you from the best deals. Vendors are not your friends.

Vendors that have the most people involved and/or complain the loudest almost certainly have the highest margins.

May need a few sacrificial vendors.

Must have written contracts. Vendors will look to change pricing/terms ASAP.

Budgeting and Policy

Must immediately take the savings out of the respective budgets, otherwise the money saved is spent elsewhere.

Consolidate buying whenever and wherever possible.

Half the savings is in demand management. Usage and spending controls are necessary to minimize leakage.

Must have top management support to make real change.

Most Important

Negotiations

Positioning is very important. Must be willing to negotiate hard and where commercially feasible, walk away.

Must remember you are dealing with vendors that negotiate the same commodity every day of their business life.

Strategic Purchasing

Almost all indirect products by their very nature are not strategic to a business. However, the manner and processes in which they are purchased is strategic.

Service Value

Our cost of services will pay for themselves, many times over.