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 What is Strategic Sourcing? What is Strategic Sourcing? Defini5on: A systema8c and fact-­‐based approach for op8mizing an organiza8on’s supply base and improving the overall value proposi8on. What it is What it is NOT Focused on the Total Cost of Ownership (TCO) incorpora8ng customer needs, organiza8onal goals, and market condi8ons Focused ONLY on cost GeBng the best product/service at the best value GeBng the cheapest product/service Driven by a rigorous and collabora8ve approach Ad-­‐hoc ac8vi8es involving only purchasing Addresses all levers for savings Focused on “bea8ng up suppliers” Decisions based on fact based analysis and market intelligence Decisions based on opinion, unjus8fied preference, or complacency A con5nuous process A one-­‐5me project or decision Scope of Strategic Sourcing? The scope of strategic sourcing extends beyond supplier price nego8a8on and takes into account the total cost of ownership Purchase Price Demand Drivers Amount Paid to Suppliers Inventory Specifica5ons Prac5ces Procurement Prac5ces Internal Policies & Procedures Internal Processes Opera5onal Prac5ces Total Acquisi5on Cost Best Prac5ce Sharing Create Partnerships with Suppliers Access to New Suppliers Cost Savings Strategic Sourcing Improve Opera5onal Efficiency Standardize Pricing Increase Quality Objec5ves of Strategic Sourcing? Objec5ves of strategic sourcing surround the reduc5on of cost while maintaining or improving quality Examine Supplier rela5onships across the en5re organiza5on Leverage en5re organiza5on’s spend Develop & implement mul5-­‐year contracts with standardized terms and condi5ons across the organiza5on Understand category buying & management process to iden5fy improvement opportuni5es Improve the value-­‐to-­‐
price rela5onship (achieve cost reduc5ons while maintaining quality/service) Objec8ves Share best prac5ces across the organiza5on