NCMA 5th Annual Commercial Contract Management Conference

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(No Transcript)
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Strategic Sourcingin the Commercial Sector
Breakout Session October 18, 2005 315
to 445 PM Fred B. Sollish, C.P.M. Managing
Director, eParagon LLC VP, Education, ISM Silicon
Valley Janie Maddox, CPCM President, Corporate
Learning Solutions
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Content

• Developing requirements
• Performing market research
• Issuing solicitations
• Conducting evaluations
• Selecting suppliers
• Forming contracts
• Establishing service levels
• Managing Performance

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Seminar Objectives

• Outline the fundamental elements of a Strategic
  Sourcing Plan
• Provide keys to improving sourcing effectiveness

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Definition

• Sourcing is the development and management of
  supplier relationships to aid in achieving the
  immediate needs of an organization.

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Contracting Process

• Commercial Contract Management strategy can
  divided into three segments
• Sourcing
• Contract Formation
• Supplier Management

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Concepts

• Strategic Sourcing is a long-term plan of action
  for the identification, development and
  management of an organizations supply chain
• The Strategic Sourcing plan serves as guidance
  during the length of time it takes to pass beyond
  the business forecast horizon
• To be effective, the Strategic Sourcing plan must
  align with the overall organizational plan.

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Major Sourcing Activities

• Early involvement during the determination and
  definition phase of the internal customers
  requirements
• Market research, analysis and benchmarking
• Development of supplier evaluation criteria
• RFP/RFQ preparation and solicitation
• Proposal/bid evaluation
• Supplier Selection, negotiation and award

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Sourcing Services

• Keys to Success

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Determine Process

• One step
• Saves time
• But eliminates incorporating multiple ideas in
  final solution
• Two step
• Slower process
• But allows greater range of proposals
• Enables consolidated SOW
• More conducive to bidding

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1. Statement of Work

• Outlines requirements
• Key objectives
• Work to be performed
• Acceptance criteria
• Performance vs. Design
• Needs (What)
• Methods (How)

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Successful SOW

• Definition and description of the requirement in
  clear, understandable terms
• Task oriented
• Logical workflow
• Include roles and responsibilities
• Realistic timeline for implementation
• Detail steps
• List specific milestones
• Link to payment
• Well-defined acceptance terms
• Parameters for acceptable quality
• Metrics for all Key Performance Indicators
• Understandable by decision makers

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2. Market Research and Analysis

• Determine market conditions
• Locate potential providers
• Comparative analysis
• Filter to qualified
• Benchmarks and references

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Successful Market Research

• Understand key reasons for present market
  leadership
• Project future values
• Work into selection criteria
• Identify drivers of change
• Understand technology employed
• Identify potential joint venture partners
• Look for long term survival
• Look for partnership potential
• Similar culture
• Staff qualifications
• Leadership

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3. Evaluation Criteria

• Typical
• Price
• Quality
• Service
• Technology
• Profile

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Successful Evaluation Criteria

• Develop in advance
• Leverage team/customer input
• Realistic
• Measurable
• Broad-based
• Identify attributes of market leaders
• Determine alignment
• Leave room for potential
• Consider best value
• Consider total cost of ownership

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4. RFP Solicitation

• Describes
• Organization
• Requirements
• Format and timeline for response
• Basis for award

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Successful RFPs

• Require clarity
• Break down SOW
• Bullet/number each element
• Request cost impact for optional items
• Avoid gotchas
• Request pricing formulas for modifications
• Require approval of Ts and Cs with submission
• Encourage broadest response
• Provide realistic timeline for response
• Reverse market Describe benefits of dealing with
  your organization
• Consider legal review for liability

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5. Response Evaluation

• Stick to initial criteria
• Weighted Average scoring
• Team driven
• Customer participation
• Define no-award conditions

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Successful Response Evaluation

• Weighted Average
• Define criteria
• Even numbers avoid fence sitting
• Establish absolute margin for automatic selection
• Prepare the team
• Describe the system
• Detail the meaning of criteria
• No-award conditions
• Eliminate non-responsive suppliers
• Demand veracity
• Determine areas for additional negotiation

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6. Supplier Selection

• Best score
• Best value
• Improvement potential
• Potential concessions through negotiations

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Successful Supplier Selection

• Select only clear leader without further
  discussion
• Encourage team discussion
• Non-adversarial
• Capture further questions for suppliers

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• End Notes

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Barriers to Sourcing Success

• Procurement not always final authority
• Relationship traps created by existing suppliers
• Ineffective processes and poor planning
• Lack of organizational vision and focus
• Insufficiently trained staff
• Crushing workload

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Summary

• Align strategy with organizational goals
• Develop long term plan
• Follow process steps which begin with the
  development of a well-written SOW
• Organize each step for results
• Prepare the way for processes that follow