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How to scope purchases | SSOA Part I/IVMethodology, Opportunity Assessment, Purchasing --- 2006 Jean-Philippe Massin, 13,175 views
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Using e-Tools or making savings on its Purchases shall always start by a Strategic Sourcing Opportunity Assessment (SSOA) so to identify right priorities at start and spend rigth effort on right Sourcing Groups. Here is a basic 4-step-methodology that might help you to get started.
In this post, I will just explain the first step.
Howto Define the Scope of purchases to include in your Strategic Sourcing program
- stage 1) Outline your company business structure
- stage 2) Understand the importance of purchased goods and services to end-product costs and revenues
- stage 3) Understand the importance of purchased goods in each BU
- stage 4) Identify purchases by category (profile Sourcing Groups)
- Below is a basic example on how to split the Sourcing Groups in 4 categories:
- Category 1: Standard – in general low-value indirect spending and non critical services
- Category 2: Leverage – in general high spending commodities as regular direct materials,
- Category 3: Strategic – in general high spending administrative, Operating and Technical Services
- Category 4: Bottleneck – in general one-shot buying as capital expenditure, investments
- Below is a basic example on how to split the Sourcing Groups in 4 categories:
Here (TBD) is a template that might be helpful to identify more precisely in which category lie your Sourcing Groups.
- stage 5) Define Sourcing Groups using a 3 level family tree (at least)
- Example of Levels: Sourcing family / Category / Sourcing group / Country or BU
- Gather purchased items from the same category that can be provided from the same set of suppliers and with a similar approach,
- Tipically you should have 50 to 60 Sourcing Families,
- Creating SGs facilitates the sourcing strategy definition and the prioritisation,
- Here is an .xls example of a Strategic Sourcing tree
- stage 6) Identify and select the initial scope for the strategic sourcing program.
- Selecting the first 3-10 Sourcing Families to work on.
By going through those 6 stages, you’ll have a good idea of your (the) company purchases and of their importance on the company bottom line, enabling you to select the first Sourcing families to put your efforts on.
Next 3 steps will be detailed in coming posts:
SSOA Part II/IV | How to determine Sourcing Strategies and tactics
SSOA Part III/IV | How to prioritize Sourcing groups (saving potentials and implementation easiness)
SSOA Part IV/IV | How to plan a Strategic Sourcing program
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November 28th, 2006 at 12:43 am
[...] In a former post, I’ve described, briefly but good enough – how to scope the purchases to include in Strategic Sourcing program. This was the Part I/IV of the whole Strategic Sourcing Opportunity Analysis methodology (SSOA) I wanted to share online. Let me now bring you to the second step, starting once you have sorted out your spending into SGs (Sourcing Groups). Purpose, in this phase, is to identify the most probable best sourcing strategy and tactics (approaches) for each SG, based on its position in a “Business-impact / Market complexity matrix”. This work is completed by executing the following 4 actions that you should – of course – conducted in a collaborative way with the key-stakeholders in your company… if you want to succeed the implementation… [...]
December 8th, 2006 at 4:25 pm
[...] In phase I/IV of a Strategic Sourcing Opportunity Assessment (see my HOWTO scope purchases post), you need to distribute your Sourcing Groups into 4 different categories (Standard, Commodity, Strategic, Bottleneck), depending their business impact and their supply-market-complexity. Below is a useful template to categorize each of your Sourcing Groups, based on the famous Porter’s 5 forces model: [...]
February 26th, 2007 at 11:12 am
[...] How to scope purchases | SSOA Part I/IV [...]