In a previous post, I have defined the 7 steps of a robust strategic sourcing methodology (SSM). My intention is now to provide more details about each step. Step 1 – profiling (or qualifying) a Sourcing Group (SG) – comes first: it’s all about understanding the SG characteristics, which is quite an important stage as everyone would agree that “a well described problem is a half-solved problem”.
Profiling, SSM Step 1 is a 4-step process, answering 4 major questions:
- “What do we buy?” – Populating the basic data about the SG: volumes purchased and used, prices and usage costs, purpose and specifications. You can use this post to remind where to get the information you need or this one to remind from which different perspective you can/could look at prices. Get in mind that importance of each data/perspectiveis variable and depending on step-2 to 4 findings, which explains why re-iteration makes sense.
- “How do we buy?” – Describing the current sourcing process, strategy and tactics, as well as gathering the constraints that have limited the potential options. Basically you should at least answer the well-known WWW (What, When, Who) for following questions:
- What triggers the purchasing process?
- How are the product specifications and volums defined?
- How is the Market analysed and potential suppliers identified?
- What was the supplier selection process?
- How many suppliers have made an offer?
- Were the offers made comparable?
- Was there a new entrant?
- How negotiations have been made?
- How long last the whole process from trigger-to-signature?
- How the deal has been finalised and signed, for how long?How was the price linked to the volume?
- How was the contract and supplier performance managed?
- “What is the market offering?” – Documenting the supply market structure, dynamics and trends; identifying potential options for sourcing from alternative markets,
- “So what?” – Synthetising results in one document to facilitate the oveall analysis and underlining any potential new options and future evolution of the SG (volumes – price – market)
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This 4-step process shall be re-iterated as more knowledge emerge. Actually, it is a continuous ongoing loop.