Strategic Sourcing Best Practices

Gary L. HopperMBA, C.P.M., OPBC

Total Cost Solutions

www.totalcostsol.com

Agenda

• Define strategic sourcing • Seven Step Sourcing Methodology• Top Five Best Practices• Some Truths About Negotiations

What Is Strategic Sourcing?

• Proactive activity• Anticipates future demand• Objective criteria• Measurable goals• Linked to mission/corporate objectives• Unique skills required• Senior management commitment

Seven Step Sourcing Methodology

1. Develop spend analysis

2. Determine business requirements

3. Conduct market analysis

4. Develop category strategy

5. Complete supplier evaluation

6. Select suppliers & negotiate agreements

7. Develop implementation plan & manage supplier performance

#1 - Getting to Yes by Fisher & Ury

• Principled negotiations• Interest vs. position• Win - Win• Expanding the pie • BATNA• Tough on the problem - not the person• Jujitsu

#2 - Total Cost

• Total Cost of Ownership– Not just price– Life cycle cost– Based on product/service ROI

• Risk Management– Not just mitigation– Quantify

#3 - RFP Process

• Compete everything material• Keep process consistent, repeatable and simple• Include boilerplate terms & conditions, NDA,

BAA, SOW, etc.• Utilize weighted evaluation matrix to score

bidders - use team approach• Engage in single source negotiations prior to

award

#4 - Negotiation Planning

Phase #1: establish objectives and goals, gather information, plan strategies and tactics (75%)

Phase #2: discover needs, utilize tactics and counter-tactics, concession and commitment (20%)

Phase #3: review agreement, plan & prepare next steps, follow-up (5%)

#5 - Supplier Management

• Clean and intelligent statement of work w/appropriate incentives/penalties

• Performance management– The Golden Rule– Objective– Exception based– Select the best tool

• Business reviews, service level agreements• Scorecards, governance plans

Some Key Negotiation Truths

• The strongest don’t always win• You must first be aware of your own needs,

assumptions and beliefs• The biggest bets are made at the end of the

game• Get a grip - develop a detached attitude• Chill out - f you can’t think of the right thing

to do - do nothing

A Few More…

• Be persistent• Don’t be bashful• Check your ego at the door• Never say “no” but “yes” has a price• Attitude is everything• Win-Win (80/20)

Resources

• “Getting to Yes” & “Getting Past No”• Negotiation Plan Template• Boilerplate T’s & C’s• www.totalcostsol.com• glhopper@totalcostsol.com• (503) 208.3153