Leading IT Transformation – Workshop 11 (Sourcing Strategies)
The Appleton Greene Corporate Training Program (CTP) for Leading IT Transformation is provided by Ms. Drabenstadt MBA BBA Certified Learning Provider (CLP). Program Specifications: Monthly cost USD$2,500.00; Monthly Workshops 6 hours; Monthly Support 4 hours; Program Duration 24 months; Program orders subject to ongoing availability.
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Learning Provider Profile
Ms. Drabenstadt is a Certified Learning Provider (CLP) at Appleton Greene and she has experience in Information Technology, Information Governance, Compliance and Audit. She has achieved an MBA, and BBA. She has industry experience within the following sectors: Technology; Insurance and Financial Services. She has had commercial experience within the following countries: United States of America, Canada, Australia, India, Trinidad, and Jamaica. Her program will initially be available in the following cities: Madison WI; Minneapolis MN; Chicago IL; Atlanta GA and Denver CO. Her personal achievements include: Developed Trusted IT-Business Relationship; Delivered Increased Business Value/Time; Decreased IT Costs; Re-tooled IT Staff; Increased IT Employee Morale. Her service skills incorporate: IT transformation leadership; process improvement; change management; program management and information governance.
MOST Analysis
Mission Statement
Most organizations rely on external technology providers for procuring the IT solutions the business needs. There are hundreds of technology providers in the market offering the same kind of solutions with the same features and deciding which product to choose or which vendor to go for can be quite a tedious task. That is where the sourcing strategies of the organization comes in handy. Strategic procurement or sourcing not only helps businesses gain a competitive advantage but also helps them manage third-party relationships and mitigate risks. Strategic sourcing provides a framework to make the sourcing of technology more efficient by laying clear guidelines for the planning, ordering, receiving, invoicing, and payment processes. Sourcing strategies are also meant to define how much the organization should spend on procurement. It should include market research to give a clear understanding of the supplier market and lay down well-defined guidelines for supplier selection. Thus, some of the key steps in building a sourcing strategy include: Assessing the company’s current spending on technology; Researching the supplier market; Picking up suitable suppliers for the project; Calculating the risks and costs involved; Negotiating with the chosen suppliers; Contracting the new suppliers; Reviewing and tracking to ensure desired output is achieved. Having a good sourcing strategy for the digital transformation program ensures that the spending on procurement is controlled, supplier relationships are maintained, and quality products and services are chosen. The sourcing strategy must be optimized by taking into consideration the different procurements inputs and comparing how they meet the company’s sourcing goals.
Objectives
01. Sourcing Plan: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
02. Building a Procurement Team: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
03. Spend Analysis Part 1: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
04. Spend Analysis Part 2: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
05. Research Supplier Market: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
06. Suitable Suppliers: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
07. Calculating Costs: departmental SWOT analysis; strategy research & development. 1 Month
08. Calculating Risks: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
09. Negotiate with Chosen Suppliers: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
10. Contracting New Suppliers: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
11. Competitive Advantage: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
12. Review Supplier Performance: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
Strategies
01. Sourcing Plan: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
02. Building a Procurement Team: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
03. Spend Analysis Part 1: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
04. Spend Analysis Part 2: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
05. Research Supplier Market: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
06. Suitable Suppliers: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
07. Calculating Costs: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
08. Calculating Risks: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
09. Negotiate with Chosen Suppliers: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
10. Contracting New Suppliers: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
11. Competitive Advantage: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
12. Review Supplier Performance: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
Tasks
01. Create a task on your calendar, to be completed within the next month, to analyze Sourcing Plan.
02. Create a task on your calendar, to be completed within the next month, to analyze Building a Procurement Team.
03. Create a task on your calendar, to be completed within the next month, to analyze Spend Analysis Part 1.
04. Create a task on your calendar, to be completed within the next month, to analyze Spend Analysis Part 2.
05. Create a task on your calendar, to be completed within the next month, to analyze Research Supplier Market.
06. Create a task on your calendar, to be completed within the next month, to analyze Suitable Suppliers.
07. Create a task on your calendar, to be completed within the next month, to analyze Calculating Costs.
08. Create a task on your calendar, to be completed within the next month, to analyze Calculating Risks.
09. Create a task on your calendar, to be completed within the next month, to analyze Negotiate with Chosen Suppliers.
10. Create a task on your calendar, to be completed within the next month, to analyze Contracting New Suppliers.
11. Create a task on your calendar, to be completed within the next month, to analyze Competitive Advantage.
12. Create a task on your calendar, to be completed within the next month, to analyze Review Supplier Performance.
Introduction
Your IT sourcing initiatives need to be strategic in order to be effective. In order to do this, you must proactively explore your organizational needs based on a clear business case. In the past, contracts were frequently awarded to the lowest bidder. A single-sourced partner chosen based only on the lowest bid is less likely to satisfy an organization’s demands today. Collaboration relationships with IT vendors that provide genuine value are essential. What are the essential elements of efficient IT sourcing plans for keeping businesses ahead in quickly evolving markets?
Tactical Vs. Strategic Sourcing — What’s The Difference?
In an IT-driven era, the previous tactical sourcing strategy involved hiring an external vendor in response to a business need. Many government and business organizations still use these frameworks to obtain the cheapest product as soon as feasible because these models were often motivated to attain the lowest cost. Sometimes it still works, especially if you’re thinking about buying a material item like IT technology. But to define key technological alliances and accomplish corporate goals, digital transformation necessitates a comprehensive and strategic approach.
In order to characterize outsourcing as a cooperation loop, strategic sourcing is used. Strategic sourcing establishes baselines for the IT service and cost improvements required to achieve business strategies up front and sets business goals and objectives. A limited list of possible partners is then presented with business plans and IT baselines. Given the level of transparency that customers are demanding, this endeavor is imperative. Customers are scrutinizing corporate collaborations more and more for factors like environmental effect and investment pledges. Your vendor partnerships are crucial to both your business objectives and brand strategy.
Back end requirements for this project include a strategic, flexible governance program and an iterative method for assessing the vendor’s strategic fit. The iterative process of this ongoing evaluation is similar to Agile techniques, which repeatedly question “Is this right?” and “Does this work?” Strategic vendor outsourcing reflects the requirement for contemporary IT relationships in this way.
Key Components Of Strategic Sourcing
The following are some of the main advantages of strategic sourcing versus conventional tactical sourcing:
• Cost reductions over the long run as opposed to one-time “low bid” techniques.
• Business strategy coordination with sourcing partners.
• A higher chance of choosing the ideal partner each time.
• Long-term collaborations that result in beneficial connections.
What constitutes a strategic sourcing project, whether it be in the supply chain, IT, or another area of the company, bearing these objectives in mind?
• A thorough grasp of your present IT services and costs is necessary for cost management. As relationship complexities rise, it’s crucial to regularly monitor your present service and cost as businesses seek to maximize partner capabilities and investments. You can contact vendors for a better price based on a long-term relationship when combined with objective negotiating around a strategic, nontactical aim.
• To get the best solutions, risk reduction, and risk sharing, solution design involves a competitive, co-design strategy with possible providers. Solution design aims to reduce costs and enhance service delivery in relation to your strategic ambitions. With this strategy, it’s crucial to maintain in-house architectural and design capabilities so that you can collaborate with potential vendors to develop solutions that are suitable for your company.
• Adaptive governance is a method for overseeing numerous service providers and adjusting your connections over time as your organization changes. Partnership difficulties rise as businesses embrace more multi-cloud systems and look for redundant supply chain models, necessitating adaptive governance even more.
A long-term examination of your sourcing possibilities is necessary for the implementation of strategic sourcing. What procedures are required for vendor evaluation?
How To Evaluate Your Sourcing Options
The objective approach and consistent evaluation procedure that are necessary for making strategic decisions about sourcing possibilities are frequently assisted by external resources. Your method should incorporate:
• A baseline for defining and assessing the costs and services offered today. Utilize the baseline to ascertain how relationships impact the broad strategic objectives of the department and the firm.
• Decide on the selection criteria that will guide the vendor relationship management procedure. Create a vendor service profile that includes objectives for diversity, equity, and inclusion as well as delivery criteria, governance requirements, and even environmental impact requirements.
• In an iterative process, investigate at the vendor(s) in order to start with a high-level solution design and make changes to the vendors and solution as you go.
• To comprehend outsourcing price models, you must compare vendor expenses to your starting point. Although this study is tailored to your particular circumstances, the benefit justifies the resource commitment required for thorough investigation.
• Develop employee buy-in for this new process. It could be necessary to make a conscious effort to include managers in the success of this new program due to interdepartmental politics. But stakeholder support is necessary for strategic sourcing to succeed.
How to Change the Game with Strategic Sourcing
How can strategic sourcing be used to enhance the procurement process and produce better business results? In this workshop, we’ll talk about sourcing tactics as they relate to IT transformation and how strategic sourcing may provide your business a competitive edge. You’ll discover some important information below that can help you change the game in your company.
1. Industry 4.0 tools can make our work easier even while COVID-19 has made them harder.
Today, it is more important than ever to overcome spreadsheets’ data processing constraints in order to properly manage spending. To do this, one must analyze enormous datasets that were previously unfathomable in size, but this can be done with today’s tested, cutting-edge technology.
Think about the following questions:
• How might new tools help procurement teams work more efficiently?
• What functions do machine learning, robotic process automation, and AI serve?
• How can your procurement team manage higher spend with faster sourcing?
2. The scope of bid evaluation is constrained by manual work, which is also hampered by months-long procedures.
The issues with manual processes have long been known, but this turbulent year has made them worse. Burnout from manual labor results in a lack of information that prevents you from consistently making the best buying decisions.
One of the major advantages of business spend management (BSM) platform adoption and procurement transformation is that it expands your team’s bandwidth by giving them new tools that give actionable insights more quickly, effectively, affordably, and efficiently. As a result, you may address tail spend with your best-trained procurement staff.
3. Your procurement team can manage greater spend thanks to quicker sourcing.
Concentrate on increasing the capability of your top sourcing specialists by utilizing the efficiency benefits provided by contemporary strategic sourcing optimization techniques, generally through a Sourcing Center of Excellence (CoE). The CoE can source a bigger percentage of addressable expenditure thanks to the efficiency advantages from new technologies, and when your top people source with the finest tools, they uncover more savings and unlock more value.
4. With the appropriate tools, you can prevent analytics burnout and amp up deals 1,000 times.
With the help of the modern tools available today, you can 1,000-fold the impact of your offerings. Is this overstating the case? In no way. You would have 1,000 times more influence over bids if you could compare 100 times as many suppliers across 100 times as many cost factors. Not necessarily easy to implement, but rather straightforward to compute
5. Get past the constraints of manual procedures and spreadsheets.
Technology advancements currently outstrip certain organizations’ capacity for change. Organizations with agility clearly have a competitive edge. The firms that can swiftly and strategically evaluate massive datasets will stand out in their industries given the abundance of data accessible.
The biggest issue of today’s procurement
The biggest challenge in procurement is coordination—coordination in the broadest sense of the word, both within the organization and among various supply chain and value chain participants.
There are many good reasons for organizations, regardless of the industry they operate in, to make procurement, especially digital procurement, a new strategic endeavor. All organizations—public administration, enterprises, non-profits, sports clubs, you name it—cannot afford to ignore the need of carefully managed, ethical procurement.
Operational inefficiency is frequently the result of procurement being dispersed across several departments within the same organizational structure. For instance, according to PwC’s digital procurement team, it happens frequently to discover orders that have been placed twice or to discover that the same invoice has been paid twice as a result of poor coordination.
In general, the necessity to handle procurement through a centralised operational model becomes more critical the more complicated the organizational structure is. The same is true for companies that offer a wide range of goods and services.
Organizations must be able to comprehend procurement holistically in order to better manage and even lower strategic risks, benefit from leverage effects, and cut costs.
Advantages of a strategic sourcing strategy
The effectiveness of purchasing management is improved by strategic sourcing. More precisely, it lowers costs, strengthens supplier and vendor relationships, increases flow traceability, and boosts monitoring, audit, and reporting. With trackable operations records and more readily available indications, it enables a better professionalization of purchasing administration.
Purchase officers, for instance, have more negotiating power when they are specialized in a particular field and can ensure they are getting the best value for their money.
Additionally, both the organization as a whole and each department separately have ongoing access to spending evaluation. With this knowledge, it is simpler and more data-driven to change the organization’s policy, which helps to lower supply-related risks, incorporate social or environmental standards, or guarantee the integrity of suppliers through Know-Your-Supplier procedures.
The procurement function plays a pivotal role in managing risk and cost across supplier management, strategic sourcing, contract management, purchase to pay and spend analytics.
Strategic sourcing vs. procurement
The variety of activities and processes required for firms to obtain goods and services is referred to as procurement. Although this theoretically entails both strategic and administrative duties, procurement departments frequently concentrate on the routine e-procurement operations and transactions, such as purchase orders, invoicing, and payments.
Strategic sourcing, on the other hand, places more emphasis on the actions taken prior to making a purchase, such as researching the market and your company’s needs. In contrast to procurement, which often seeks out the lowest-priced alternative, strategic sourcing considers the larger picture and uses extensive data sets to assess the importance of other criteria like ideal vendor relationships and decreased business risk.
Software products
By unifying sourcing standards and offering a platform for gathering data about suppliers, goods, markets, and business needs, strategic sourcing software can help the approach. Larger procurement systems, procure-to-pay platforms, ERP systems, and supply chain management systems may occasionally include this software.
However, “strategic sourcing application suites” are becoming more and more well-liked products. These frequently have various software modules and typically contain features for e-sourcing, spend analysis, contract administration, and supplier relationship management. Gartner lists Coupa, GEP, Ivalua, JAGGAER, SAP, Synertrade, and Zycus as major players. Although some companies also provide on-premises or private cloud versions, multitenant SaaS is the main delivery method for their products.
Vendors are attempting to integrate AI and advanced analytics to improve the efficiency of the sourcing process. These capabilities can offer predictive models based on variables including market circumstances, the season, and geopolitical considerations, as well as recommendations based on historical performance and current measurements. In other circumstances, the supply chain’s use of blockchain is also improving visibility and accuracy.
Executive Summary
Chapter 1: Sourcing Plan
In order to create the goods and services you provide to your consumers and run regular business operations, your company needs a solid IT sourcing strategy. It takes careful planning to develop and optimize a sourcing strategy that offers value in the form of improved competitive performance, operational efficiency, and insight-driven decision-making, in addition to a good return on investment (ROI). A well-crafted and well carried out strategic sourcing plan serves as the foundation of the strategic sourcing process.
Even though it could seem like a difficult task, developing and putting such a plan into place doesn’t have to be a barrier to the long-term success of your business. To create a strategic sourcing plan you can use to fine-tune your supply chain for maximum cost savings, streamlined business processes, and big-time value that exceeds, rather than simply meets, your business requirements, form a team, invest in the right digital tools, and adhere to a few basic principles.
Why Having an Effective Strategic Sourcing Plan Matters
Doing business in the modern world is both more rewarding and more risky than ever before. Digital transformation and emerging technologies like artificial intelligence, Big Data analytics, and process automation have radically altered the ways in which businesses seek to meet the needs of their customers.
In procurement, the challenge has become maintaining business continuity despite disruptions like the COVID-19 pandemic, natural disasters, and international political upheaval. Every dollar you spend as part of your procurement strategy needs to generate the best possible ROI, both financially through cost reductions and lowest possible total cost of ownership (TCO), and in less tangible ways like improved supplier relationship management, bigger market share, and stronger competitive performance.
For companies of all types and sizes, strategic sourcing is a core component of overcoming this challenge.
Proactive and driven by analysis of internal processes, supply markets, and supplier performance, strategic sourcing makes it possible to meet business needs with maximum efficiency and value. Companies who choose to invest the resources, time, and talent required to develop a strategic sourcing strategy will improve their ability insulate themselves against unnecessary risk while freeing capital required for growth and innovation.
Ideally, your strategic sourcing team will be made up of professionals who understand the importance of procurement and its partner accounts payable as drivers of value creation and cost savings for the business as a whole (particularly via the procure to pay, or P2P, process).
Chapter 2: Building a Procurement Team
This course manual will serve as a step-by-step approach for creating a procurement team, regardless of whether you are an experienced procurement specialist or just getting started with setting up a procurement department.
The topics covered in this course manual are:
1. Procurement team roles and responsibilities
2. How to build the procurement function and set up the team
3. Typical structure of a procurement team
4. How to set the expectation of different stakeholders
5. What skills to look for while hiring for the procurement department
Structure of the procurement team
The definition of several departments and subteams within the procurement team is the next stage.
Please keep in mind that this is only a representation of the tasks that your team is in charge of; it is not recommended, but it is possible, to assign each task to one individual.
The following duties should be performed by your procurement team.
1. Purchasing
2. Strategic sourcing
3. Contract management
4. analytics and reporting for data
Purchase group
The end-to-end procurement transaction is enabled as the main purpose of purchasing. A purchasing team is typically in charge of:
• Ensuring that the mechanisms and process are in place to handle user requests and properly authorize spending.
• Make sure the company offers an easy purchase method.
• Putting together the purchase order and mailing it to the supplier.
• Orders are being escalated to ensure prompt delivery of the goods and services needed to run the company.
• Teaching staff about the buying process.
Strategic sourcing team
Working with vendors to negotiate lower prices is a key component of strategic sourcing. The following are the main steps in the strategic sourcing process.
• Establish a strategic sourcing process to make sure that all vendor assessments adhere to a set framework.
• Inform stakeholders on the duties and responsibilities of the business vs the sourcing team in a vendor evaluation process as well as how the sourcing team analyzes vendors.
• Run the RFX (Request for X) or RFP (Request for Proposal) process with the suppliers. RFIs are typically issued to gather data for an RFP that will be used to request proposals from vendors.
• Analyzing the RFP answers will assist the company in making a selection that is in line with its objectives.
• Review vendor contracts with contract management to reduce risk.
• Control a savings goal and keep track of purchase cost savings.
Contract management team
The following responsibilities are under the purview of the contract management function:
• supplying sample contracts for the various goods and services your company uses to make purchases. It also entails establishing benchmarks for jargon used in commerce and law. With the help of the finance and treasury department, standards for commercial terms are established.
• To enable sourcing self-service, define common fallback clauses and collaborate with sourcing teams.
• Verify vendor agreements to make sure they adhere to the established corporate terms.
• To negotiate a contract, work with a vendor’s attorney.
• Establish a central repository for all contracts so that it is simple to locate contracts and keep track of important dates like renewal and expiration dates.
Although procurement or the legal department may perform contract management, we are referring to the job function when we use the term.
Both strategies have advantages and disadvantages. For instance, having a contract management function inside procurement facilitates better communication between the procurement team members and quicker contract review turnaround times. On the other hand, you cannot make the best use of that resource if there are few contracts to evaluate.
In order to come up with the best model that works for everyone, we advise talking with your chief legal officer.
Data analytics and reporting
Spend visibility is the best tool for persuading your organization of the advantages of procurement. Therefore, we strongly advise that you assign the following responsibilities to a data analytics and reporting department.
• Prepare routine spend visibility reports and distribute them to the various departments.
• Recognize the benefits that the budget owners derive from reporting and how the data analytics team may enhance reporting.
• Analyze your spending to find savings chances all the time. Let me explain this further.
The strategic sourcing team is often in charge of finding and taking advantage of savings opportunities. However, the sourcing team is typically preoccupied with managing the opportunities and doesn’t typically have time to sift through the data to discover new chances.
Consider this to be a sales-related task. A field sales team is in charge of pursuing those prospects after an inside sales team has finished identifying and qualifying new sales opportunities.
The sourcing team can be more effective in carrying out those chances for savings if you make sure that a distinct person is identifying them.
The Booz and Company model that outlines the ideal procurement methodology is shown below.
Chapter 3: Spend Analysis Part 1
The basics of spend analysis
Key terms
To get you started, consider the following fundamental terms and concepts.
Spend data, commonly referred to as procurement spend data, is information about a company’s outlays for goods and services obtained from outside vendors.
The procedure for gathering, classifying, and managing that spend data is known as spend data management.
The practice of gathering, scrubbing, classifying, and analyzing expenditure data using either specialized software or one-off spend cubes is known as spend analytics.
Spend analysis is the activity of studying spending patterns in order to cut expenses, boost productivity, or strengthen supplier ties.
Just so you know, spend analytics and spend analysis are not the same thing even though they are sometimes used interchangeably. You won’t have the pertinent data required for spend analysis without spend analytics.
Consider it this way: Spend analytics provides you with the information you require, and spend analysis is what you do with it.
Let’s examine the contrasts in more detail.
Spend analytics vs. spend analysis
The science underpinning spend data management is spend analytics. Data collection and cleaning are the first steps. The data must then be classified and consolidated in order to be grouped and identified in an understandable manner. The data can then be combined with outside data and made ready for analysis.
With spend analysis, you look at a particular area of the spend data (in this case, technology) to find and extract useful data that provides you with strategic insights. It’s one of the most important strategies that procurement companies do to actively find savings opportunities, control risks, and maximize their organization’s purchasing power.
Spend analysis is frequently viewed as the cornerstone of sourcing. Executives in charge of sourcing might use it as a tool to design better performance. The knowledge gained from spend analysis can lead to cost reductions, performance enhancement, contract compliance, and better visibility into company spending.
Analyzing procurement spending offers a baseline against which changes can be measured and a trustworthy point of reference for selecting tactics to obtain both short- and long-term savings.
Spend analysis, which is its essential strategic technique, develops a parallel process that directs senior leaders and budget holders in optimizing value for the organization’s dollar as procurement advances to a more strategic function within the company.
Chapter 4: Spend Analysis Part 2
How to do Spend Analysis
You will learn about the steps of expenditure analysis in this first portion of the course handbook. While the size and style of spend analysis initiatives might vary, they typically involve six essential processes from expenditure identification to analysis.
Spend Analysis in Six Steps
1. Identify Data Sources
Getting a general overview of the spend that will be included is the first step in beginning a spend analysis. By doing this, you can limit such purchases to a select few important vendors.
You can divide your spending into many categories and then figure out all the expenditure data sources from your departments, facilities, and business units. Start by determining which departments inside your company, such as procurement, finance, and marketing, make important purchases.
2. Data Extraction
Once you have focused your efforts, you can collect your spend information and compile it into a single database. Collecting data into a single source can be difficult because it is frequently in several forms, languages, and currencies. However, there are software tools available to simplify this process.
3. Data Cleansing
Cleaning is the process of identifying errors in a set of data, eliminating faulty records, and eliminating redundant information. To ensure correctness, this includes identifying and removing mistakes and anomalies in descriptions and transactions. You may determine which contacts in your database are missing information or are irrelevant by performing data cleansing. For accurate information, typos are deleted, and missing codes are verified and fixed.
4. Data Enrichment
The practice of enhancing, modifying, and improving unprocessed expenditure data is known as data enrichment. Standardizing the spend data is another aspect that makes it easier to view. The header and line-level names and details are all verified to be accurate and adhere to a particular naming standard by enriching the spend data. Specific fields are frequently missing from data, and misspellings, abbreviations, and poorly coded entries are all too typical.
5. Classification
Grouping many suppliers who belong to the same parent firm or organization is a common classification practice. For instance, Microsoft products like Surface, Azure, and Microsoft 365 should all be combined. Additionally, you can combine the data into relevant categories (such as marketing, office supplies, and software) to determine how and where the company is spending its money.
Spending throughout the entire business is made easier to handle and manage when heterogeneous expenditure data is unified into clearly defined categories. To make better sourcing decisions, procurement can obtain visibility into global expenditure by classifying all purchase transactions into a unified taxonomy.
6. Analysis of Data
Finding areas for cost-savings and other procurement improvements is the final step. Analysis can be used to look into a variety of business issues, such as making sure you have the best contract agreements with each supplier or verifying customers are buying from favored suppliers.
With this, you may spot chances to narrow down the pool of providers for each category and bargain for lower prices. Only after accurate calculations have been made using the confirmed projections can the best probable option for cost reduction be realized.
Chapter 5: Research Supplier Market
It’s critical to comprehend the situation of the market you’re about to enter before you can create a successful IT procurement or sourcing strategy. Without this information, there is a far greater danger of squandering time and money and not getting the desired results.
Why is market research important and what does it entail?
Prior to creating your procurement strategy, it’s important to have a better understanding of the market’s offerings. This knowledge may originate from a number of sources:
• An internet search for vendors’ qualifications.
• Making contact with organizations that are similar to discover what they do to obtain a specific commodity or service.
• Market research on specialized websites like IBISWorld to learn about the key players, the services they provide, and how the product or service is changing in response to new technologies.
There are numerous advantages to conducting this market research. It primarily makes sure that your overall procurement plan is in line with market capabilities. There is no sense in developing a strategy around an item that the market is unable to supply. Once you are aware of what the market is capable of, you may adjust your procurement strategy for the greatest results.
You can use market research to determine if it would be ideal to supply the solution internally, through the market, or through a combination of both. Prior to conducting your due diligence to determine the supply capabilities of the industry and your own company, you cannot truly know which alternative is the finest.
If some segments of the market are developing faster than others, market research also gives the opportunity to investigate alternate solutions, fresh inventions, or joint venture prospects. There may be options to future-proof that service by discovering new and innovative providers, but you must first conduct research to find them. New technology is evolving so quickly that you don’t want what you’re acquiring to be obsolete within a year.
Last but not least, market research gives you the chance to learn the potential prices of the products and services you’re interested in, so you can decide whether a tender can be completed within set budgets.
Despite how crucial it is, conducting market research requires expertise and time.
What might occur if you don’t finish your research?
Not conducting the appropriate market research can have a lot of harmful effects.
Without a thorough understanding of the market, you run the risk of having an unexpected or unsuccessful conclusion, which will cost you time and money.
If the tender is rejected because the strategy wasn’t carefully considered or you don’t have enough money to pay for the services offered, it could also harm your reputation and make it less likely that the market would tender for future projects you release.
Last but not least, a lack of research might result in missed opportunities: If you simply use the same approach as when you last made a bid to the same suppliers, you can miss out on superior service or lower prices. For all you know, there could be 10 brand-new vendors out there who perform better for less money or can provide you with services your present IT vendor cannot. But those opportunities will be gone unless you conduct the necessary study and comprehend how the market has changed since the last time you tendered.
After this workshop you will be able to:
1. Set priorities for doing a supply market analysis after finishing this course manual.
2. Describe the various information sources and the value of getting accurate market intelligence.
3. Use Porter’s “Five Forces,” SWOT analysis, and supplier analysis to gauge the amount of competition in your supply market.
4. By integrating the assessment of supply market risk and its possible influence on the organization, determine which market segments best fulfill the organization’s supply objectives and present the best balance of risks and opportunities.
Chapter 6: Suitable Suppliers
Making the appropriate vendor/supplier selection can make or kill your company. A poor supplier can hurt your client relations, lower the quality of your goods and services, disrupt business operations, and raise costs all while lowering sales revenues and margins.
On the other hand, a reputable vendor or supplier will offer you high-quality goods and services that at the very least meet your IT business needs, if not beyond them. They will regularly and dependably supply them at the appropriate time and cost.
The significance of making strategic supplier selections is discussed in this course handbook. It outlines the variety of variables influencing your decision and provides you with a list of crucial standards for choosing a provider.
Last but not least, it includes best practice guidance on limiting the pool of potential suppliers, conducting background checks, and managing supplier relationships.
Selecting suppliers for your company
Selection criteria for suppliers
Suppliers are essential to the success of businesses. Businesses must take into account a variety of important variables in order to choose the best candidates, such as:
• Price
• Cost-effectiveness
• Quality
• Reliability
• Responsiveness
• Flexibility
A successful relationship can also be largely influenced by shared geography and culture. Effective purchasing should be driven by the requirements and goals of your company.
Worth the money
If you are a start-up, cost may be a crucial factor in selecting a supplier. Cheap providers, though, aren’t always the best investment. You must decide how much you are willing to pay for your goods if you want dependability and quality from your providers. Finding the right mix between price, dependability, quality, and service is crucial.
Reliability and excellence
Your suppliers’ quality needs to be consistent so that your customers don’t link you with low quality. Additionally, if your supplier disappoints you by making a late delivery or providing defective goods, you might disappoint your client.
Swiftness and adaptability
You can avoid tying up too much working capital in stock by being able to place regular, minor orders. Quick responses to unforeseen situations and shifting client demands are made possible by flexible providers. Suppliers who provide you a speedy delivery service will rank higher than those who compete on other aspects, such as price alone, if you want to reduce the time it takes you to serve your clients.
Solid support and transparent communication
In order to have a positive working relationship with your supplier, communication is crucial. Your supplier should communicate honestly and frequently, starting with the initial briefing and continuing through ongoing feedback and regular meetings. Your vendors must deliver on time or, if they can’t, must be truthful and give you plenty of notice.
Monetary security
Making ensuring your supplier has a strong enough cash flow to deliver what you need when you need it is always worthwhile. Your confidence in their ability to stay in business when you need them most will be increased by a credit check.
Chapter 7: Calculating Costs
Sourcing is defined as the process of establishing terms and conditions for acquiring goods and services from external sources. Sourcing cost is a Key Performance Indicator (KPI) that is vital to supply management. This provides a clear way to measure the performance of the entire procurement process, and since it is a KPI based on cost metrics, it directly impacts the bottom line.
Sourcing savings serve the purpose of driving down the cost of goods (including the handling and delivery of those items) as well as improving terms in the supplier relationship. Reducing procurement costs can be a simple and instant way to increase profit margins without sacrificing the quality of products offered to consumers.
There are a variety of techniques businesses can implement to drive down these purchasing expenses, but first, it is vital to understand the different types and components of procurement costs and identify why these expenses occur.
How Procurement Cost Works
Procurement is the entire process of obtaining services or goods for business operations, from vendor sourcing to receiving the ordered products. For inventory-based businesses, the budget for procurement can make up a substantial portion of their resources.
It is also important to note that the terms purchasing’ and procurement’ are often used interchangeably, though they are not the same. Purchasing refers to obtaining goods on behalf of the company while procurement describes all of the steps involved in obtaining them. Therefore, purchasing is actually only one of the many steps in the procurement process.
Types of Procurement Costs
1. Base Cost
The key procurement cost driver is the per-item amount. In larger transactions, this is especially true. It is the largest expense and the most challenging to reduce. The best move is to find competing suppliers with the same products and negotiate the best price per unit.
2. Closing Cost
Many companies outsource the buying and selling of inventory, which means that expenses such as brokerage, legal fees (when legal advisors are hired to draft contracts), and commissions may add up.
3. Taxes and Duties
For inventory acquired overseas, there are considerable costs associated such as government charges like tariffs, taxes as flat rates (like VAT or GST), and more. Import taxes can be complex, so many companies hire brokers to assist with the customs process.
4. Negotiation Cost
Creating an agreement with a vendor will generally involve additional time researching prospective suppliers, leading to indirect labor costs. Negotiating with suppliers can also be costly, especially if the staff is traveling to make the agreements.
Chapter 8: Calculating Risks
Without suppliers, your business would be unable to offer the features, products, and services necessary for an IT transformation to be successful. Having a strategic sourcing plan enhances your success and might even give you a competitive edge.
However, every contract you have with a vendor, every piece of equipment you buy for the assembly line, and every task you outsource to a third party increases your company’s risk. That danger cannot be avoided unless you have no intention of using any providers, which is virtually impossible. There will always be some operational risk to manage, regardless of the industry you’re in or the type of your organization. Third-party risk is a constant concern, and some companies will pose a greater risk than others.
Suppliers who fall short of your standards might cause disaster. For instance, according to recent reports from Soha Systems, a third of all data breaches are either directly or indirectly the result of a third party’s error. A missing shipment or a defective component might cost you just as much, even though IT activities typically receive the majority of the focus when it comes to supply risk.
Organizations may employ supplier risk assessments on their most crucial vendors for improved supplier risk management, also known as vendor risk management, to mitigate the threat of these hazards. Risk departments are aware of the significance of these audits, but supplier diversity teams might not be.
Reasons Why Risk Cannot Be Eliminated
Every time your business works with a new vendor, it assumes some risk since supplier risk is inevitable. That danger cannot be completely eradicated no matter what you do, but you can take measures to minimize it.
Some suppliers are riskier than others depending on a number of variables, including how crucial they are to your company’s operations, how simple it is to find a replacement, and the potential financial damage should something go wrong.
The supplier risk assessment is an essential component of choosing and managing vendors since it helps to identify and mitigate vendor risks before crises develop. In order to give credit for a job well done to the businesses in your supply chain that are supporting your company, these supplier assessments can also take into account supplier performance.
Chapter 9: Negotiate with Chosen Suppliers
Setting goals is crucial when negotiating
Any IT sourcing strategy includes extensive negotiation with vendors, but it can also be the most challenging.
A Negotiation Introduction
Procurement professionals engage in negotiation to develop advantageous conditions for a new supplier contract. When a contract is renewed, this may entail negotiating new terms with a current supplier or revising existing terms with a new vendor.
Negotiations are frequently used to find the best deal on a product or service, as well as the best terms for payment, delivery, and production. Instead of only trying to acquire the lowest price, the talks should take into account the best alternative for both the buyer and the supplier, as this will assist to forge better ties with long-term partners.
Prior to getting into discussions with suppliers, it is crucial to establish objectives to make sure everything you set out to do is covered.
Defining Your Negotiation Goals
When formulating the goals of a negotiation with a supplier, there are a lot of things to take into account. These might comprise, but aren’t restricted to:
• Cost
• Value for money
• Delivery time
• Payment conditions
• Maintenance and after-care terms
• Quality requirements
• Lifetime expenses for each product or service
• The significance of each good or service to your company
Making a list of the most crucial issues should be one of your first steps in negotiation preparation. This will offer you some leeway to choose which elements are open to compromise and which cannot.
Think seriously about your ideal outcome when analyzing the crucial variables. What terms for the pricing, quality, and so on would you accept? And based on what you believe the supplier is likely to offer, what is the absolute minimum you will accept?
It’s crucial to keep in mind that the conditions of the agreement should be advantageous to both parties. A low price could be advantageous in the short term, but if you want to use the provider again or repeatedly, agreeing to a little higher price or adjustments to other terms will strengthen the long-term connection.
Chapter 10: Contracting New Suppliers
Negotiating supplier contracts
Accept conditions of supplier contract
It’s ideal to create a written contract when you and your provider have agreed to terms and conditions and reached a settlement.
This agreement must be signed by both parties. Despite being legally binding, verbal agreements are notoriously difficult to depend on in court.
What do supply contracts entail?
A firm and a supplier enter into a contract or agreement for the supply of the specified goods or services. It is a legal document that you can use to gauge the performance of the supplier.
Supplier contracts often include the following in addition to the description of the things to be supplied:
• The name and addresses of both parties
• Timeframes
• The obligations of both parties
• Information on prices and payments, including a timeline and the invoice process
• Performance standards and evaluation procedures
• Terms of secrecy
• Refunds and payment conditions
• The extent of the post-purchase support you need
• The terms and circumstances of the contract, such as renewal or termination
It may also contain highly precise supplier contract terms or clauses, such as those that specify that the supplier retains ownership of the products until they are paid in full or that the seller’s contractual obligation is limited while taking the buyer’s statutory rights into consideration.
What the contract will cover should be agreed upon by both parties. The terms and conditions used may be your own, the supplier’s, or a combination of the two, depending on who has the most negotiating leverage during the contract negotiation.
Creating supplier agreements
Online resources include free templates and sample agreements. However, default wording is unlikely to be enough because a supplier contract should be comprehensive and tailored to your needs.
When creating your terms and conditions, you should think about seeking legal counsel.
You should: in order to draft a supplier agreement Inform the supplier in writing of your intended use for its supplies and request written confirmation that what it is selling you is adequate. Write the contract in a way that protects your interests and, if feasible, transfers legal responsibility for any issues to the provider.
Build into the contract what will happen if there are any problems with the goods or services – for example, will the supplier replace individual faulty goods or the whole batch and within what time period; specify penalties for failure to meet delivery deadlines or quality standards, such as a future discount; and keep a written record of all assurances given.
The procedures that must be followed in the event that either party wants to end the contract or resolve a dispute should also be taken into consideration.
Chapter 11: Competitive Advantage
The ability of your business to offer goods and services that are superior to those of your rivals and/or offer greater value is known as competitive advantage. Typically, your business’s competitive advantages are built over time with input from numerous departments.
A company can choose the best portfolio of suppliers and match those suppliers with the firm’s objective by using an efficient IT procurement process. This can be accomplished through agreeable terms and cross-functional excellence, which stimulates and incubates collaboration.
A quick but real cost improvement can be produced through an efficient and effective procurement procedure, which can also improve the supply chain’s agility.
Therefore, a well-defined procurement process can give your company a competitive edge by lowering costs throughout the value chain, enhancing efficiency in the delivery of high-quality goods and services, supporting product innovation, decreasing supplier risk, and boosting supply chain resilience.
To address diverse difficulties, the majority of supply chain-aligned businesses review their procurement methods. Typically, eight out of ten of these businesses respond in an emergency. Instead, the ideal strategy for a corporation is to see the problems and plan how to solve them.
Currently, the majority of experts see strategic IT acquisition and competitive advantage as two sides of the same coin. But they have a valid motive for doing it. There is a cause-and-effect connection between the two factors. Over the past few years, the rules of procurement have altered as a result of the introduction of new companies who compete with one another to offer the best value on goods or services. As a result, there is greater competition than ever before for procurement firms. They can only achieve a definite advantage in the current cutthroat IT business climate by strategic buying. It connects businesses with a trustworthy and varied choice of providers, which turns out to be a game-changer for them.
How your organization manages its procurement process will determine whether or not it can incorporate reputable suppliers in its mission statement. The two advantages of strategic procurement are improved tangible cost and a more agile supply chain. These two elements combine to give a procurement organization a competitive edge.
Chapter 12: Review Supplier Performance
How Do You Manage Your Supplier Performance?
A business process known as supplier performance management (SPM) is used to assess, monitor, and manage a supplier’s performance. Professionals in supplier management aim to reduce expenses, reduce risks, and promote continual improvement. Systems are used by businesses to track supplier performance levels.
What Is A Scorecard For Supplier Performance?
A tracking device used to keep track of supplier performance is a supplier performance scorecard (supplier scorecard). Quality, delivery, lead time, price, and responsiveness of suppliers are all tracked over time through supplier scorecards. Data from scorecards are used by experts in supplier performance to enhance supplier relationships.
What Dimensions Typically Appear On A Supplier Performance Scorecard?
Financial health (bankruptcy risk, liquidity, sales, etc.), operational performance (quality, lead times, customer services, etc.), contract compliance, business processes (defect prevention, inspections, etc.), price change year over year, negotiator price impact, and overall cost are the typical supplier performance scorecard dimensions.Supplier Performance Management Best Practices
For long-term success, all businesses need to establish a fundamental expertise in successfully quantifying and managing risks. Dealing with suppliers involves significant risks and the possibility of disaster in the form of insolvency, environmental issues, delivery failure, a lack of materials, subpar performance, or defective products. The majority of firms are aware of these dangers, yet they don’t do enough to properly manage them. There are still many steps a company may take to lessen these supplier risks, even though it is true that the amount of risk cannot be reduced to zero and all tragedies cannot be prevented. Regularly managing and monitoring the performance of suppliers is a crucial and economical step. This article will give a general overview of the ways in which businesses can lower their risks and realize more value from their supply bases.
The advantages of supplier performance management
Companies can gain a number of important advantages by continuously assessing and monitoring supplier performance. First, businesses may steer clear of pricey and even disastrous supply disruptions. Second, businesses can lower their overall risk from additional negative situations including flaws, environmental difficulties, or safety problems with a supplier’s method, resources, or goods. Thirdly, businesses who successfully adopt supplier performance management programs will be better able to identify issues early and start putting corrective measures in place before the issue becomes a major headache or negatively impacts the bottom line. These advantages are easily measurable. The financial benefit of preventing even part of these disruptions would be in the millions each year if a corporation understands that there are typically 100 supply disruptions per year and that each disruption costs, on average, $100,000.
The advantages to a business with a successful supplier performance management program go beyond risk reduction and issue avoidance. Positive outcomes are also seen. One advantage is enhanced supplier cooperation, which can result in greater coordination and help the supplier and the organization more effectively fulfill corporate goals. Increased productivity and efficiency for the company in its interactions with its suppliers can be another advantage. A robust supplier performance management system can also empower suppliers to take the initiative to carry out duties like updating their data to guarantee that everything is up to date. Additionally, it can lower costs and increase invoice accuracy. Errors are avoided and doing business with suppliers may be made simpler as a result.
Curriculum
Leading IT Transformation – Workshop 11 – Sourcing Strategies
- Sourcing Plan
- Building a Procurement Team
- Spend Analysis Part 1
- Spend Analysis Part 2
- Research Supplier Market
- Suitable Suppliers
- Calculating Costs
- Calculating Risks
- Negotiate with Chosen Suppliers
- Contracting New Suppliers
- Competitive Advantage
- Review Supplier Performance
Distance Learning
Introduction
Welcome to Appleton Greene and thank you for enrolling on the Leading IT Transformation corporate training program. You will be learning through our unique facilitation via distance-learning method, which will enable you to practically implement everything that you learn academically. The methods and materials used in your program have been designed and developed to ensure that you derive the maximum benefits and enjoyment possible. We hope that you find the program challenging and fun to do. However, if you have never been a distance-learner before, you may be experiencing some trepidation at the task before you. So we will get you started by giving you some basic information and guidance on how you can make the best use of the modules, how you should manage the materials and what you should be doing as you work through them. This guide is designed to point you in the right direction and help you to become an effective distance-learner. Take a few hours or so to study this guide and your guide to tutorial support for students, while making notes, before you start to study in earnest.
Study environment
You will need to locate a quiet and private place to study, preferably a room where you can easily be isolated from external disturbances or distractions. Make sure the room is well-lit and incorporates a relaxed, pleasant feel. If you can spoil yourself within your study environment, you will have much more of a chance to ensure that you are always in the right frame of mind when you do devote time to study. For example, a nice fire, the ability to play soft soothing background music, soft but effective lighting, perhaps a nice view if possible and a good size desk with a comfortable chair. Make sure that your family know when you are studying and understand your study rules. Your study environment is very important. The ideal situation, if at all possible, is to have a separate study, which can be devoted to you. If this is not possible then you will need to pay a lot more attention to developing and managing your study schedule, because it will affect other people as well as yourself. The better your study environment, the more productive you will be.
Study tools & rules
Try and make sure that your study tools are sufficient and in good working order. You will need to have access to a computer, scanner and printer, with access to the internet. You will need a very comfortable chair, which supports your lower back, and you will need a good filing system. It can be very frustrating if you are spending valuable study time trying to fix study tools that are unreliable, or unsuitable for the task. Make sure that your study tools are up to date. You will also need to consider some study rules. Some of these rules will apply to you and will be intended to help you to be more disciplined about when and how you study. This distance-learning guide will help you and after you have read it you can put some thought into what your study rules should be. You will also need to negotiate some study rules for your family, friends or anyone who lives with you. They too will need to be disciplined in order to ensure that they can support you while you study. It is important to ensure that your family and friends are an integral part of your study team. Having their support and encouragement can prove to be a crucial contribution to your successful completion of the program. Involve them in as much as you can.
Successful distance-learning
Distance-learners are freed from the necessity of attending regular classes or workshops, since they can study in their own way, at their own pace and for their own purposes. But unlike traditional internal training courses, it is the student’s responsibility, with a distance-learning program, to ensure that they manage their own study contribution. This requires strong self-discipline and self-motivation skills and there must be a clear will to succeed. Those students who are used to managing themselves, are good at managing others and who enjoy working in isolation, are more likely to be good distance-learners. It is also important to be aware of the main reasons why you are studying and of the main objectives that you are hoping to achieve as a result. You will need to remind yourself of these objectives at times when you need to motivate yourself. Never lose sight of your long-term goals and your short-term objectives. There is nobody available here to pamper you, or to look after you, or to spoon-feed you with information, so you will need to find ways to encourage and appreciate yourself while you are studying. Make sure that you chart your study progress, so that you can be sure of your achievements and re-evaluate your goals and objectives regularly.
Self-assessment
Appleton Greene training programs are in all cases post-graduate programs. Consequently, you should already have obtained a business-related degree and be an experienced learner. You should therefore already be aware of your study strengths and weaknesses. For example, which time of the day are you at your most productive? Are you a lark or an owl? What study methods do you respond to the most? Are you a consistent learner? How do you discipline yourself? How do you ensure that you enjoy yourself while studying? It is important to understand yourself as a learner and so some self-assessment early on will be necessary if you are to apply yourself correctly. Perform a SWOT analysis on yourself as a student. List your internal strengths and weaknesses as a student and your external opportunities and threats. This will help you later on when you are creating a study plan. You can then incorporate features within your study plan that can ensure that you are playing to your strengths, while compensating for your weaknesses. You can also ensure that you make the most of your opportunities, while avoiding the potential threats to your success.
Accepting responsibility as a student
Training programs invariably require a significant investment, both in terms of what they cost and in the time that you need to contribute to study and the responsibility for successful completion of training programs rests entirely with the student. This is never more apparent than when a student is learning via distance-learning. Accepting responsibility as a student is an important step towards ensuring that you can successfully complete your training program. It is easy to instantly blame other people or factors when things go wrong. But the fact of the matter is that if a failure is your failure, then you have the power to do something about it, it is entirely in your own hands. If it is always someone else’s failure, then you are powerless to do anything about it. All students study in entirely different ways, this is because we are all individuals and what is right for one student, is not necessarily right for another. In order to succeed, you will have to accept personal responsibility for finding a way to plan, implement and manage a personal study plan that works for you. If you do not succeed, you only have yourself to blame.
Planning
By far the most critical contribution to stress, is the feeling of not being in control. In the absence of planning we tend to be reactive and can stumble from pillar to post in the hope that things will turn out fine in the end. Invariably they don’t! In order to be in control, we need to have firm ideas about how and when we want to do things. We also need to consider as many possible eventualities as we can, so that we are prepared for them when they happen. Prescriptive Change, is far easier to manage and control, than Emergent Change. The same is true with distance-learning. It is much easier and much more enjoyable, if you feel that you are in control and that things are going to plan. Even when things do go wrong, you are prepared for them and can act accordingly without any unnecessary stress. It is important therefore that you do take time to plan your studies properly.
Management
Once you have developed a clear study plan, it is of equal importance to ensure that you manage the implementation of it. Most of us usually enjoy planning, but it is usually during implementation when things go wrong. Targets are not met and we do not understand why. Sometimes we do not even know if targets are being met. It is not enough for us to conclude that the study plan just failed. If it is failing, you will need to understand what you can do about it. Similarly if your study plan is succeeding, it is still important to understand why, so that you can improve upon your success. You therefore need to have guidelines for self-assessment so that you can be consistent with performance improvement throughout the program. If you manage things correctly, then your performance should constantly improve throughout the program.
Study objectives & tasks
The first place to start is developing your program objectives. These should feature your reasons for undertaking the training program in order of priority. Keep them succinct and to the point in order to avoid confusion. Do not just write the first things that come into your head because they are likely to be too similar to each other. Make a list of possible departmental headings, such as: Customer Service; E-business; Finance; Globalization; Human Resources; Technology; Legal; Management; Marketing and Production. Then brainstorm for ideas by listing as many things that you want to achieve under each heading and later re-arrange these things in order of priority. Finally, select the top item from each department heading and choose these as your program objectives. Try and restrict yourself to five because it will enable you to focus clearly. It is likely that the other things that you listed will be achieved if each of the top objectives are achieved. If this does not prove to be the case, then simply work through the process again.
Study forecast
As a guide, the Appleton Greene Leading IT Transformation corporate training program should take 12-18 months to complete, depending upon your availability and current commitments. The reason why there is such a variance in time estimates is because every student is an individual, with differing productivity levels and different commitments. These differentiations are then exaggerated by the fact that this is a distance-learning program, which incorporates the practical integration of academic theory as an as a part of the training program. Consequently all of the project studies are real, which means that important decisions and compromises need to be made. You will want to get things right and will need to be patient with your expectations in order to ensure that they are. We would always recommend that you are prudent with your own task and time forecasts, but you still need to develop them and have a clear indication of what are realistic expectations in your case. With reference to your time planning: consider the time that you can realistically dedicate towards study with the program every week; calculate how long it should take you to complete the program, using the guidelines featured here; then break the program down into logical modules and allocate a suitable proportion of time to each of them, these will be your milestones; you can create a time plan by using a spreadsheet on your computer, or a personal organizer such as MS Outlook, you could also use a financial forecasting software; break your time forecasts down into manageable chunks of time, the more specific you can be, the more productive and accurate your time management will be; finally, use formulas where possible to do your time calculations for you, because this will help later on when your forecasts need to change in line with actual performance. With reference to your task planning: refer to your list of tasks that need to be undertaken in order to achieve your program objectives; with reference to your time plan, calculate when each task should be implemented; remember that you are not estimating when your objectives will be achieved, but when you will need to focus upon implementing the corresponding tasks; you also need to ensure that each task is implemented in conjunction with the associated training modules which are relevant; then break each single task down into a list of specific to do’s, say approximately ten to do’s for each task and enter these into your study plan; once again you could use MS Outlook to incorporate both your time and task planning and this could constitute your study plan; you could also use a project management software like MS Project. You should now have a clear and realistic forecast detailing when you can expect to be able to do something about undertaking the tasks to achieve your program objectives.
Performance management
It is one thing to develop your study forecast, it is quite another to monitor your progress. Ultimately it is less important whether you achieve your original study forecast and more important that you update it so that it constantly remains realistic in line with your performance. As you begin to work through the program, you will begin to have more of an idea about your own personal performance and productivity levels as a distance-learner. Once you have completed your first study module, you should re-evaluate your study forecast for both time and tasks, so that they reflect your actual performance level achieved. In order to achieve this you must first time yourself while training by using an alarm clock. Set the alarm for hourly intervals and make a note of how far you have come within that time. You can then make a note of your actual performance on your study plan and then compare your performance against your forecast. Then consider the reasons that have contributed towards your performance level, whether they are positive or negative and make a considered adjustment to your future forecasts as a result. Given time, you should start achieving your forecasts regularly.
With reference to time management: time yourself while you are studying and make a note of the actual time taken in your study plan; consider your successes with time-efficiency and the reasons for the success in each case and take this into consideration when reviewing future time planning; consider your failures with time-efficiency and the reasons for the failures in each case and take this into consideration when reviewing future time planning; re-evaluate your study forecast in relation to time planning for the remainder of your training program to ensure that you continue to be realistic about your time expectations. You need to be consistent with your time management, otherwise you will never complete your studies. This will either be because you are not contributing enough time to your studies, or you will become less efficient with the time that you do allocate to your studies. Remember, if you are not in control of your studies, they can just become yet another cause of stress for you.
With reference to your task management: time yourself while you are studying and make a note of the actual tasks that you have undertaken in your study plan; consider your successes with task-efficiency and the reasons for the success in each case; take this into consideration when reviewing future task planning; consider your failures with task-efficiency and the reasons for the failures in each case and take this into consideration when reviewing future task planning; re-evaluate your study forecast in relation to task planning for the remainder of your training program to ensure that you continue to be realistic about your task expectations. You need to be consistent with your task management, otherwise you will never know whether you are achieving your program objectives or not.
Keeping in touch
You will have access to qualified and experienced professors and tutors who are responsible for providing tutorial support for your particular training program. So don’t be shy about letting them know how you are getting on. We keep electronic records of all tutorial support emails so that professors and tutors can review previous correspondence before considering an individual response. It also means that there is a record of all communications between you and your professors and tutors and this helps to avoid any unnecessary duplication, misunderstanding, or misinterpretation. If you have a problem relating to the program, share it with them via email. It is likely that they have come across the same problem before and are usually able to make helpful suggestions and steer you in the right direction. To learn more about when and how to use tutorial support, please refer to the Tutorial Support section of this student information guide. This will help you to ensure that you are making the most of tutorial support that is available to you and will ultimately contribute towards your success and enjoyment with your training program.
Work colleagues and family
You should certainly discuss your program study progress with your colleagues, friends and your family. Appleton Greene training programs are very practical. They require you to seek information from other people, to plan, develop and implement processes with other people and to achieve feedback from other people in relation to viability and productivity. You will therefore have plenty of opportunities to test your ideas and enlist the views of others. People tend to be sympathetic towards distance-learners, so don’t bottle it all up in yourself. Get out there and share it! It is also likely that your family and colleagues are going to benefit from your labors with the program, so they are likely to be much more interested in being involved than you might think. Be bold about delegating work to those who might benefit themselves. This is a great way to achieve understanding and commitment from people who you may later rely upon for process implementation. Share your experiences with your friends and family.
Making it relevant
The key to successful learning is to make it relevant to your own individual circumstances. At all times you should be trying to make bridges between the content of the program and your own situation. Whether you achieve this through quiet reflection or through interactive discussion with your colleagues, client partners or your family, remember that it is the most important and rewarding aspect of translating your studies into real self-improvement. You should be clear about how you want the program to benefit you. This involves setting clear study objectives in relation to the content of the course in terms of understanding, concepts, completing research or reviewing activities and relating the content of the modules to your own situation. Your objectives may understandably change as you work through the program, in which case you should enter the revised objectives on your study plan so that you have a permanent reminder of what you are trying to achieve, when and why.
Distance-learning check-list
Prepare your study environment, your study tools and rules.
Undertake detailed self-assessment in terms of your ability as a learner.
Create a format for your study plan.
Consider your study objectives and tasks.
Create a study forecast.
Assess your study performance.
Re-evaluate your study forecast.
Be consistent when managing your study plan.
Use your Appleton Greene Certified Learning Provider (CLP) for tutorial support.
Make sure you keep in touch with those around you.
Tutorial Support
Programs
Appleton Greene uses standard and bespoke corporate training programs as vessels to transfer business process improvement knowledge into the heart of our clients’ organizations. Each individual program focuses upon the implementation of a specific business process, which enables clients to easily quantify their return on investment. There are hundreds of established Appleton Greene corporate training products now available to clients within customer services, e-business, finance, globalization, human resources, information technology, legal, management, marketing and production. It does not matter whether a client’s employees are located within one office, or an unlimited number of international offices, we can still bring them together to learn and implement specific business processes collectively. Our approach to global localization enables us to provide clients with a truly international service with that all important personal touch. Appleton Greene corporate training programs can be provided virtually or locally and they are all unique in that they individually focus upon a specific business function. They are implemented over a sustainable period of time and professional support is consistently provided by qualified learning providers and specialist consultants.
Support available
You will have a designated Certified Learning Provider (CLP) and an Accredited Consultant and we encourage you to communicate with them as much as possible. In all cases tutorial support is provided online because we can then keep a record of all communications to ensure that tutorial support remains consistent. You would also be forwarding your work to the tutorial support unit for evaluation and assessment. You will receive individual feedback on all of the work that you undertake on a one-to-one basis, together with specific recommendations for anything that may need to be changed in order to achieve a pass with merit or a pass with distinction and you then have as many opportunities as you may need to re-submit project studies until they meet with the required standard. Consequently the only reason that you should really fail (CLP) is if you do not do the work. It makes no difference to us whether a student takes 12 months or 18 months to complete the program, what matters is that in all cases the same quality standard will have been achieved.
Support Process
Please forward all of your future emails to the designated (CLP) Tutorial Support Unit email address that has been provided and please do not duplicate or copy your emails to other AGC email accounts as this will just cause unnecessary administration. Please note that emails are always answered as quickly as possible but you will need to allow a period of up to 20 business days for responses to general tutorial support emails during busy periods, because emails are answered strictly within the order in which they are received. You will also need to allow a period of up to 30 business days for the evaluation and assessment of project studies. This does not include weekends or public holidays. Please therefore kindly allow for this within your time planning. All communications are managed online via email because it enables tutorial service support managers to review other communications which have been received before responding and it ensures that there is a copy of all communications retained on file for future reference. All communications will be stored within your personal (CLP) study file here at Appleton Greene throughout your designated study period. If you need any assistance or clarification at any time, please do not hesitate to contact us by forwarding an email and remember that we are here to help. If you have any questions, please list and number your questions succinctly and you can then be sure of receiving specific answers to each and every query.
Time Management
It takes approximately 1 Year to complete the Leading IT Transformation corporate training program, incorporating 12 x 6-hour monthly workshops. Each student will also need to contribute approximately 4 hours per week over 1 Year of their personal time. Students can study from home or work at their own pace and are responsible for managing their own study plan. There are no formal examinations and students are evaluated and assessed based upon their project study submissions, together with the quality of their internal analysis and supporting documents. They can contribute more time towards study when they have the time to do so and can contribute less time when they are busy. All students tend to be in full time employment while studying and the Leading IT Transformation program is purposely designed to accommodate this, so there is plenty of flexibility in terms of time management. It makes no difference to us at Appleton Greene, whether individuals take 12-18 months to complete this program. What matters is that in all cases the same standard of quality will have been achieved with the standard and bespoke programs that have been developed.
Distance Learning Guide
The distance learning guide should be your first port of call when starting your training program. It will help you when you are planning how and when to study, how to create the right environment and how to establish the right frame of mind. If you can lay the foundations properly during the planning stage, then it will contribute to your enjoyment and productivity while training later. The guide helps to change your lifestyle in order to accommodate time for study and to cultivate good study habits. It helps you to chart your progress so that you can measure your performance and achieve your goals. It explains the tools that you will need for study and how to make them work. It also explains how to translate academic theory into practical reality. Spend some time now working through your distance learning guide and make sure that you have firm foundations in place so that you can make the most of your distance learning program. There is no requirement for you to attend training workshops or classes at Appleton Greene offices. The entire program is undertaken online, program course manuals and project studies are administered via the Appleton Greene web site and via email, so you are able to study at your own pace and in the comfort of your own home or office as long as you have a computer and access to the internet.
How To Study
The how to study guide provides students with a clear understanding of the Appleton Greene facilitation via distance learning training methods and enables students to obtain a clear overview of the training program content. It enables students to understand the step-by-step training methods used by Appleton Greene and how course manuals are integrated with project studies. It explains the research and development that is required and the need to provide evidence and references to support your statements. It also enables students to understand precisely what will be required of them in order to achieve a pass with merit and a pass with distinction for individual project studies and provides useful guidance on how to be innovative and creative when developing your Unique Program Proposition (UPP).
Tutorial Support
Tutorial support for the Appleton Greene Leading IT Transformation corporate training program is provided online either through the Appleton Greene Client Support Portal (CSP), or via email. All tutorial support requests are facilitated by a designated Program Administration Manager (PAM). They are responsible for deciding which professor or tutor is the most appropriate option relating to the support required and then the tutorial support request is forwarded onto them. Once the professor or tutor has completed the tutorial support request and answered any questions that have been asked, this communication is then returned to the student via email by the designated Program Administration Manager (PAM). This enables all tutorial support, between students, professors and tutors, to be facilitated by the designated Program Administration Manager (PAM) efficiently and securely through the email account. You will therefore need to allow a period of up to 20 business days for responses to general support queries and up to 30 business days for the evaluation and assessment of project studies, because all tutorial support requests are answered strictly within the order in which they are received. This does not include weekends or public holidays. Consequently you need to put some thought into the management of your tutorial support procedure in order to ensure that your study plan is feasible and to obtain the maximum possible benefit from tutorial support during your period of study. Please retain copies of your tutorial support emails for future reference. Please ensure that ALL of your tutorial support emails are set out using the format as suggested within your guide to tutorial support. Your tutorial support emails need to be referenced clearly to the specific part of the course manual or project study which you are working on at any given time. You also need to list and number any questions that you would like to ask, up to a maximum of five questions within each tutorial support email. Remember the more specific you can be with your questions the more specific your answers will be too and this will help you to avoid any unnecessary misunderstanding, misinterpretation, or duplication. The guide to tutorial support is intended to help you to understand how and when to use support in order to ensure that you get the most out of your training program. Appleton Greene training programs are designed to enable you to do things for yourself. They provide you with a structure or a framework and we use tutorial support to facilitate students while they practically implement what they learn. In other words, we are enabling students to do things for themselves. The benefits of distance learning via facilitation are considerable and are much more sustainable in the long-term than traditional short-term knowledge sharing programs. Consequently you should learn how and when to use tutorial support so that you can maximize the benefits from your learning experience with Appleton Greene. This guide describes the purpose of each training function and how to use them and how to use tutorial support in relation to each aspect of the training program. It also provides useful tips and guidance with regard to best practice.
Tutorial Support Tips
Students are often unsure about how and when to use tutorial support with Appleton Greene. This Tip List will help you to understand more about how to achieve the most from using tutorial support. Refer to it regularly to ensure that you are continuing to use the service properly. Tutorial support is critical to the success of your training experience, but it is important to understand when and how to use it in order to maximize the benefit that you receive. It is no coincidence that those students who succeed are those that learn how to be positive, proactive and productive when using tutorial support.
Be positive and friendly with your tutorial support emails
Remember that if you forward an email to the tutorial support unit, you are dealing with real people. “Do unto others as you would expect others to do unto you”. If you are positive, complimentary and generally friendly in your emails, you will generate a similar response in return. This will be more enjoyable, productive and rewarding for you in the long-term.
Think about the impression that you want to create
Every time that you communicate, you create an impression, which can be either positive or negative, so put some thought into the impression that you want to create. Remember that copies of all tutorial support emails are stored electronically and tutors will always refer to prior correspondence before responding to any current emails. Over a period of time, a general opinion will be arrived at in relation to your character, attitude and ability. Try to manage your own frustrations, mood swings and temperament professionally, without involving the tutorial support team. Demonstrating frustration or a lack of patience is a weakness and will be interpreted as such. The good thing about communicating in writing, is that you will have the time to consider your content carefully, you can review it and proof-read it before sending your email to Appleton Greene and this should help you to communicate more professionally, consistently and to avoid any unnecessary knee-jerk reactions to individual situations as and when they may arise. Please also remember that the CLP Tutorial Support Unit will not just be responsible for evaluating and assessing the quality of your work, they will also be responsible for providing recommendations to other learning providers and to client contacts within the Appleton Greene global client network, so do be in control of your own emotions and try to create a good impression.
Remember that quality is preferred to quantity
Please remember that when you send an email to the tutorial support team, you are not using Twitter or Text Messaging. Try not to forward an email every time that you have a thought. This will not prove to be productive either for you or for the tutorial support team. Take time to prepare your communications properly, as if you were writing a professional letter to a business colleague and make a list of queries that you are likely to have and then incorporate them within one email, say once every month, so that the tutorial support team can understand more about context, application and your methodology for study. Get yourself into a consistent routine with your tutorial support requests and use the tutorial support template provided with ALL of your emails. The (CLP) Tutorial Support Unit will not spoon-feed you with information. They need to be able to evaluate and assess your tutorial support requests carefully and professionally.
Be specific about your questions in order to receive specific answers
Try not to write essays by thinking as you are writing tutorial support emails. The tutorial support unit can be unclear about what in fact you are asking, or what you are looking to achieve. Be specific about asking questions that you want answers to. Number your questions. You will then receive specific answers to each and every question. This is the main purpose of tutorial support via email.
Keep a record of your tutorial support emails
It is important that you keep a record of all tutorial support emails that are forwarded to you. You can then refer to them when necessary and it avoids any unnecessary duplication, misunderstanding, or misinterpretation.
Individual training workshops or telephone support
Please be advised that Appleton Greene does not provide separate or individual tutorial support meetings, workshops, or provide telephone support for individual students. Appleton Greene is an equal opportunities learning and service provider and we are therefore understandably bound to treat all students equally. We cannot therefore broker special financial or study arrangements with individual students regardless of the circumstances. All tutorial support is provided online and this enables Appleton Greene to keep a record of all communications between students, professors and tutors on file for future reference, in accordance with our quality management procedure and your terms and conditions of enrolment. All tutorial support is provided online via email because it enables us to have time to consider support content carefully, it ensures that you receive a considered and detailed response to your queries. You can number questions that you would like to ask, which relate to things that you do not understand or where clarification may be required. You can then be sure of receiving specific answers to each individual query. You will also then have a record of these communications and of all tutorial support, which has been provided to you. This makes tutorial support administration more productive by avoiding any unnecessary duplication, misunderstanding, or misinterpretation.
Tutorial Support Email Format
You should use this tutorial support format if you need to request clarification or assistance while studying with your training program. Please note that ALL of your tutorial support request emails should use the same format. You should therefore set up a standard email template, which you can then use as and when you need to. Emails that are forwarded to Appleton Greene, which do not use the following format, may be rejected and returned to you by the (CLP) Program Administration Manager. A detailed response will then be forwarded to you via email usually within 20 business days of receipt for general support queries and 30 business days for the evaluation and assessment of project studies. This does not include weekends or public holidays. Your tutorial support request, together with the corresponding TSU reply, will then be saved and stored within your electronic TSU file at Appleton Greene for future reference.
Subject line of your email
Please insert: Appleton Greene (CLP) Tutorial Support Request: (Your Full Name) (Date), within the subject line of your email.
Main body of your email
Please insert:
1. Appleton Greene Certified Learning Provider (CLP) Tutorial Support Request
2. Your Full Name
3. Date of TS request
4. Preferred email address
5. Backup email address
6. Course manual page name or number (reference)
7. Project study page name or number (reference)
Subject of enquiry
Please insert a maximum of 50 words (please be succinct)
Briefly outline the subject matter of your inquiry, or what your questions relate to.
Question 1
Maximum of 50 words (please be succinct)
Maximum of 50 words (please be succinct)
Question 3
Maximum of 50 words (please be succinct)
Question 4
Maximum of 50 words (please be succinct)
Question 5
Maximum of 50 words (please be succinct)
Please note that a maximum of 5 questions is permitted with each individual tutorial support request email.
Procedure
* List the questions that you want to ask first, then re-arrange them in order of priority. Make sure that you reference them, where necessary, to the course manuals or project studies.
* Make sure that you are specific about your questions and number them. Try to plan the content within your emails to make sure that it is relevant.
* Make sure that your tutorial support emails are set out correctly, using the Tutorial Support Email Format provided here.
* Save a copy of your email and incorporate the date sent after the subject title. Keep your tutorial support emails within the same file and in date order for easy reference.
* Allow up to 20 business days for a response to general tutorial support emails and up to 30 business days for the evaluation and assessment of project studies, because detailed individual responses will be made in all cases and tutorial support emails are answered strictly within the order in which they are received.
* Emails can and do get lost. So if you have not received a reply within the appropriate time, forward another copy or a reminder to the tutorial support unit to be sure that it has been received but do not forward reminders unless the appropriate time has elapsed.
* When you receive a reply, save it immediately featuring the date of receipt after the subject heading for easy reference. In most cases the tutorial support unit replies to your questions individually, so you will have a record of the questions that you asked as well as the answers offered. With project studies however, separate emails are usually forwarded by the tutorial support unit, so do keep a record of your own original emails as well.
* Remember to be positive and friendly in your emails. You are dealing with real people who will respond to the same things that you respond to.
* Try not to repeat questions that have already been asked in previous emails. If this happens the tutorial support unit will probably just refer you to the appropriate answers that have already been provided within previous emails.
* If you lose your tutorial support email records you can write to Appleton Greene to receive a copy of your tutorial support file, but a separate administration charge may be levied for this service.
How To Study
Your Certified Learning Provider (CLP) and Accredited Consultant can help you to plan a task list for getting started so that you can be clear about your direction and your priorities in relation to your training program. It is also a good way to introduce yourself to the tutorial support team.
Planning your study environment
Your study conditions are of great importance and will have a direct effect on how much you enjoy your training program. Consider how much space you will have, whether it is comfortable and private and whether you are likely to be disturbed. The study tools and facilities at your disposal are also important to the success of your distance-learning experience. Your tutorial support unit can help with useful tips and guidance, regardless of your starting position. It is important to get this right before you start working on your training program.
Planning your program objectives
It is important that you have a clear list of study objectives, in order of priority, before you start working on your training program. Your tutorial support unit can offer assistance here to ensure that your study objectives have been afforded due consideration and priority.
Planning how and when to study
Distance-learners are freed from the necessity of attending regular classes, since they can study in their own way, at their own pace and for their own purposes. This approach is designed to let you study efficiently away from the traditional classroom environment. It is important however, that you plan how and when to study, so that you are making the most of your natural attributes, strengths and opportunities. Your tutorial support unit can offer assistance and useful tips to ensure that you are playing to your strengths.
Planning your study tasks
You should have a clear understanding of the study tasks that you should be undertaking and the priority associated with each task. These tasks should also be integrated with your program objectives. The distance learning guide and the guide to tutorial support for students should help you here, but if you need any clarification or assistance, please contact your tutorial support unit.
Planning your time
You will need to allocate specific times during your calendar when you intend to study if you are to have a realistic chance of completing your program on time. You are responsible for planning and managing your own study time, so it is important that you are successful with this. Your tutorial support unit can help you with this if your time plan is not working.
Keeping in touch
Consistency is the key here. If you communicate too frequently in short bursts, or too infrequently with no pattern, then your management ability with your studies will be questioned, both by you and by your tutorial support unit. It is obvious when a student is in control and when one is not and this will depend how able you are at sticking with your study plan. Inconsistency invariably leads to in-completion.
Charting your progress
Your tutorial support team can help you to chart your own study progress. Refer to your distance learning guide for further details.
Making it work
To succeed, all that you will need to do is apply yourself to undertaking your training program and interpreting it correctly. Success or failure lies in your hands and your hands alone, so be sure that you have a strategy for making it work. Your Certified Learning Provider (CLP) and Accredited Consultant can guide you through the process of program planning, development and implementation.
Reading methods
Interpretation is often unique to the individual but it can be improved and even quantified by implementing consistent interpretation methods. Interpretation can be affected by outside interference such as family members, TV, or the Internet, or simply by other thoughts which are demanding priority in our minds. One thing that can improve our productivity is using recognized reading methods. This helps us to focus and to be more structured when reading information for reasons of importance, rather than relaxation.
Speed reading
When reading through course manuals for the first time, subconsciously set your reading speed to be just fast enough that you cannot dwell on individual words or tables. With practice, you should be able to read an A4 sheet of paper in one minute. You will not achieve much in the way of a detailed understanding, but your brain will retain a useful overview. This overview will be important later on and will enable you to keep individual issues in perspective with a more generic picture because speed reading appeals to the memory part of the brain. Do not worry about what you do or do not remember at this stage.
Content reading
Once you have speed read everything, you can then start work in earnest. You now need to read a particular section of your course manual thoroughly, by making detailed notes while you read. This process is called Content Reading and it will help to consolidate your understanding and interpretation of the information that has been provided.
Making structured notes on the course manuals
When you are content reading, you should be making detailed notes, which are both structured and informative. Make these notes in a MS Word document on your computer, because you can then amend and update these as and when you deem it to be necessary. List your notes under three headings: 1. Interpretation – 2. Questions – 3. Tasks. The purpose of the 1st section is to clarify your interpretation by writing it down. The purpose of the 2nd section is to list any questions that the issue raises for you. The purpose of the 3rd section is to list any tasks that you should undertake as a result. Anyone who has graduated with a business-related degree should already be familiar with this process.
Organizing structured notes separately
You should then transfer your notes to a separate study notebook, preferably one that enables easy referencing, such as a MS Word Document, a MS Excel Spreadsheet, a MS Access Database, or a personal organizer on your cell phone. Transferring your notes allows you to have the opportunity of cross-checking and verifying them, which assists considerably with understanding and interpretation. You will also find that the better you are at doing this, the more chance you will have of ensuring that you achieve your study objectives.
Question your understanding
Do challenge your understanding. Explain things to yourself in your own words by writing things down.
Clarifying your understanding
If you are at all unsure, forward an email to your tutorial support unit and they will help to clarify your understanding.
Question your interpretation
Do challenge your interpretation. Qualify your interpretation by writing it down.
Clarifying your interpretation
If you are at all unsure, forward an email to your tutorial support unit and they will help to clarify your interpretation.
Qualification Requirements
The student will need to successfully complete the project study and all of the exercises relating to the Leading IT Transformation corporate training program, achieving a pass with merit or distinction in each case, in order to qualify as an Accredited Leading IT Transformation Specialist (ALITTS). All monthly workshops need to be tried and tested within your company. These project studies can be completed in your own time and at your own pace and in the comfort of your own home or office. There are no formal examinations, assessment is based upon the successful completion of the project studies. They are called project studies because, unlike case studies, these projects are not theoretical, they incorporate real program processes that need to be properly researched and developed. The project studies assist us in measuring your understanding and interpretation of the training program and enable us to assess qualification merits. All of the project studies are based entirely upon the content within the training program and they enable you to integrate what you have learnt into your corporate training practice.
Leading IT Transformation – Grading Contribution
Project Study – Grading Contribution
Customer Service – 10%
E-business – 05%
Finance – 10%
Globalization – 10%
Human Resources – 10%
Information Technology – 10%
Legal – 05%
Management – 10%
Marketing – 10%
Production – 10%
Education – 05%
Logistics – 05%
TOTAL GRADING – 100%
Qualification grades
A mark of 90% = Pass with Distinction.
A mark of 75% = Pass with Merit.
A mark of less than 75% = Fail.
If you fail to achieve a mark of 75% with a project study, you will receive detailed feedback from the Certified Learning Provider (CLP) and/or Accredited Consultant, together with a list of tasks which you will need to complete, in order to ensure that your project study meets with the minimum quality standard that is required by Appleton Greene. You can then re-submit your project study for further evaluation and assessment. Indeed you can re-submit as many drafts of your project studies as you need to, until such a time as they eventually meet with the required standard by Appleton Greene, so you need not worry about this, it is all part of the learning process.
When marking project studies, Appleton Greene is looking for sufficient evidence of the following:
Pass with merit
A satisfactory level of program understanding
A satisfactory level of program interpretation
A satisfactory level of project study content presentation
A satisfactory level of Unique Program Proposition (UPP) quality
A satisfactory level of the practical integration of academic theory
Pass with distinction
An exceptional level of program understanding
An exceptional level of program interpretation
An exceptional level of project study content presentation
An exceptional level of Unique Program Proposition (UPP) quality
An exceptional level of the practical integration of academic theory
Preliminary Analysis
Research Paper
“Stay, Switch or Back – Evaluating the IT Sourcing Cycle
A Sheffield Hallam University thesis,
By Nicholas Paul Butler,
September 2012.
Abstract
IT outsourcing has been a rich source for discussion since the landmark deal between Kodak and IBM in July 1989, being seen by many as the agreement that started outsourcing being perceived by companies as a serious strategic choice. With agreements generally signed for between 5 and 10 years, the research looks at what happens when an outsourcing agreement ends, either early or at contract end.
The research looks at IT sourcing strategies within UK private organisations using mixed-methods research, a qualitative case study and a qualitative survey. Two frameworks were developed to facilitate the research, the IT Sourcing Cycle and the IT Functions & Systems Diamond. The Service Dynamics (SERVDYN) instrument was also created to gauge factors relating to service performance, quality and relationship in the IT sourcing decision.
The Case Study, with data collected via semi-structured interviews and supporting documentation, seemed to show results different from the perception of backsourcing in previous studies (McLaughlin & Peppard 2006, Veltri et al 2008). It was clear that although the stated reasons for the decision were largely the same for outsourcing and backsourcing, they only appeared to tell part of the story. The Transition stage of the IT Sourcing Cycle proved the most revealing, with the implications for practise going further than had been previously found via secondary research.
The survey was sent to 794 larger private UK companies, of which 69 responded. The survey instrument was designed to collect the views of respondents of various reasons, benefits etc. for those with different IT sourcing strategies; in-house, outsourced, switched vendors or backsourced.
The research findings seem to suggest that although common reasons were given for the various sourcing options taken, there were other forces at work during the decision phase. Although service and relationship quality appear to play a part in the decision phase of the IT sourcing cycle, further research is required to ascertain if it provides a significant input to trigger the movement from Operation to Decision phase of the IT Sourcing Cycle.
Introduction
1.1 The Research Domain
Much has been written about the sourcing of Information Technology (IT) over the last 40 years or so and the multiple approaches that can be taken. Over the last 15- 20 years, much of the focus within publications has been on outsourcing. However, Deloitte (2005) in a survey of 25 major companies in the United States found that 1 in 4 companies brought outsourced operations back in-house. So, what makes an organisation review their IT arrangements and what are the options?
1.1.1 First Thoughts
Why is IT important? Raskino (2011) reported that “On average, business leaders attribute 21 % of revenue to the IT capability of their firms.”
IT outsourcing has been practised by organisations all over the world since the trendsetting agreement between Kodak and IBM in July 1989 (Loh & Venkatraman 1992b). On this basis, organisations that outsource some or all of their IT provision could effectively be handing over the management of up to 21 % of their revenue to a third party. What drives organisations to take such actions, and, more importantly, what happens when the agreement ends or is terminated?
McCue (2003) states that the original outsourcing deal between Sainsbury’s and Accenture had a value of 17% of Sainsbury’s market capitalisation. This leads to investors looking beyond the predicted cost savings toward the fact that it is a huge organisational and cultural change (McCue 2003).
2. IT Sourcing – Strategy, Change & Options
This Chapter constitutes the literature review. It explores the relationship between business strategy, change and IT outsourcing. It reviews the current outsourcing literature and discusses the way IT can be viewed within an organisation. It looks at the different facets of the IT decision and explores the relationship between outsourcing clients and vendors. Finally, it proposes the IT Strategic Diamond for categorising functions and systems.
2.1 Introduction A literature review is alternatives
“…a systematic, explicit, and reproducible method for identifying, evaluating; and synthesizing the existing body of completed and recorded work produced by researchers, scholars, and practitioners.” (Fink 2010, p3)
The purpose of this Chapter is to review the body of literature pertaining to the first research objective – “To understand why organisations change their IT sourcing strategy and explore the effects of the changes on their provision of IT.” In order to explore this domain, IT Outsourcing is used as an area of inquiry deemed useful in understanding why organisations change the provision of their IT.
Making the decision to outsource some or all of an organisation’s IT could be viewed as a business decision motivated by the desire for change. Any change within the organisation can act a trigger for change in the way IT is sourced. Any decision to outsource IT is not carried out in isolation; the whole organisation can be affected by the decision. Whatever the reason or reasons for outsourcing some or all of an organisation’s IT, the change within the organisation would generally be significant. More specifically, it affects the relationship between the outsourced functions and the rest of the organisation changes. The rest of the business would have to communicate with a third party for their IT requirements and involves a significant change in management behaviour within the outsourcing organisation 9 (Feeney & Willcocks 1998, Willcocks & Feeney 2006).
When reviewing IT sourcing it is clear, for example, that backsourcing (bringing previously outsourced IT back in-house) would not be an option if the organisation had not previously outsourced some or all of its IT. It therefore seemed logical to explore why organisations outsource, so that these factors can be compared with those for backsourcing (i.e. the frameworks for outsourcing) before creating one for backsourcing. The reasons for changing to outsourcing are another important area to explore, so that they can be contrasted with the reasons given for backsourcing.
So why change at all? In this chapter, the idea of business strategy and the possible effect on IT strategy is considered. The motivation for change at an organisational level is then investigated and used as a Tens’ to consider the specific motivation for IT outsourcing. IT outsourcing is then explored from a number of perspectives, including a review of theories applied to the decision to outsource. This is followed by a discussion of the way IT may be perceived within an organisation, how that may affect a decision to outsource and the way outsourcing agreements could be managed depending on the perception of the IT function being outsourced.”
To continue reading this paper, please visit: www.shura.shu.ac.uk
Research Article
“Rethinking IT Sourcing and Supplier Management for the Digital Age
By Catherine Crowley, Marian Carcary, Eileen Doherty and Gerry Conway,
Innovation Value Institute, Maynooth University, Ireland,
1 January 2017.
Abstract
In the new era of digital transformation, the role of IT sourcing is becoming more strategic. A recent global outsourcing survey showed 53% of respondents outsource elements of their IT function and that continued growth in outsourcing is expected for the foreseeable future. Due to dependency on external partners, there is an increase in both the potential opportunities and the risks involved. Organizations can benefit from integrating third party capabilities, and accommodating ‘outside in’ innovation that leverages the considerable knowledge base of supply partners and creates synergies among other business ecosystem participants. Despite these opportunities, sourcing organizations have many challenges to contend with, such as sustainable supply chain governance, end-to-end traceability, legal and regulatory global compliance, data privacy, and tolerance for risk in service level agreements and contracts. New outsourcing models such as cloudsourcing, microsourcing, crowdsourcing, impact sourcing and rural sourcing have evolved, and many of these new models require behavioural and managerial type shifts. In order to address these challenges, organizations and their suppliers need strong complementary capabilities to build successful relationships. Both contractual and relational governance are important, and organizations additionally need to maintain a strategy of agility and adaptability in order to mitigate the lock-in and dependency risks associated with outsourcing.
This paper presents a review of pertinent literature, and discusses core learnings in relation to impacts on sourcing and supplier management in a digital business landscape. Based on an analysis of the literature and insights gained from engaging with industry and academic experts, the paper proposes a model that can be used to develop a capability to support effective sourcing and supplier management. This model provides a basis for further development in an industry/academia collaborative research project and aims to provide practical guidance to organizations in facing key challenges and optimizing the opportunities of IT sourcing and supplier management in the era of digital transformation.
Introduction
Digital transformation is defined as “the use of new digital technologies (social media, mobile, analytics or embedded devices) to enable major business improvements (such as enhancing customer experience, streamlining operations or creating new business models)”. It is regarded as being increasingly critical to the organization’s competitiveness, and a core enabler to how it operates and evolves (Fitzgerald et al., 2013). It requires that organizations adapt their business models and business processes, rethink strategy, and collaborate with the business ecosystem to provide more innovative products and services. Organization’s executives see the potential for using digital technologies to open routes to new ways of doing business but are unclear on how to get the results and look for guidance on the best means to achieve transformation in their particular areas of responsibility. This has impact across many IT management activities, one being the important function of sourcing and supplier management.
One approach to address digital transformation is to develop and mature the sourcing and supplier management capability in the organization. An organizational capability is defined as “the ability of an organization to perform a coordinated set of tasks, utilizing organizational resources, for the purpose of achieving a particular end result.” (Helfat and Peteraf, 2003, p.999). Development of an IT capability is needed in order to leverage greater value from IT investments in the organization (Peppard and Ward, 2004). Leveraging an organization’s capability is particularly relevant to digital business strategy, as in order to remain competitive, organizations need to continually re-configure the capabilities they have developed over time (Zahra et al., 2006). This paper takes a capability perspective in reviewing digital transformation developments and the responses needed for effective sourcing and supplier management.
The research aims of this paper are:
• To examine the key facets of sourcing and supplier management and identify how these are being impacted by the digital business landscape.
• Determine both the challenges that need to be addressed and the opportunities that can be exploited.
• Conceptualize the key insights uncovered, in a model that can be used to guide sourcing and supplier management capability improvement by practitioners, to address digital transformation developments.
The structure of this paper is as follows: Section 1 has introduced the IT sourcing and supplier management research focus. The literature review in section 2 looks at current literature around how the nature of IT sourcing and supplier management is dramatically transforming due to digitization and provides contextual background to pertinent challenges and opportunities emerging from the digital business landscape. Section 3 outlines the methodological approach adopted. Section 4 presents the conceptual model, while section 5 presents discussions, conclusions, and avenues of future research.”
To continue reading this article, please visit: www.mural.maynoothuniversity.ie
Research Paper
“A MCDM approach for sourcing strategy mix decision in IT projects
Abstract
It is widely accepted that a business requires constantly evolving strategies that can not only adapt to external environmental change but also identify internal value-added activities and, even more effectively, achieve the goals of management. A sourcing decision about whether to keep IT functions in-house or contract with a third-party service provider is nevertheless entirely strategic and contingent upon organizational goals and contextual and project-specific factors. In order to adequately evaluate such sourcing decision and ensure that tasks can be assigned appropriately, this article proposes a Multi-Criteria Decision Making (MCDM) approach to achieve effective problem-solving by combining the following three methods: decision making trial and evaluation laboratory (DEMATEL), analytical network process (ANP), and zero-one goal programming (ZOGP). The final research results reveal that an organization can – simultaneously – not only take advantage of its internal or external resources to set priorities for task arrangements within the portfolio of sourcing decisions, but also optimize operating strategy and management despite limited resources after consulting with the expert panel.
1. Introduction
1.1. Optimal operations strategy and management
As the out-sourcing services market for information technology (IT) evolves and grows, the sourcing decision models that involved no integrated approach to project management and were prevalent during the 1990s may now be less applicable, given both the deci- sion maker’s needs and external environmental change. This is not only because IT or information systems (IS) stays in the era of turbulent marketplaces, global competition, and volatile technology but also because past sourcing decisions used an entire IT/IS department as a unit of analysis rather than treating individual task arrangement of IT/IS projects separately. A business, moreover, has to expose its services to customers, partners and third parties continuously via new technologies in the race for better customer service, shorter cycle times, higher operating efficiency and growth (McBride, 2009). While the Worldwide Web, RFID, location based services and search engines can greatly expand the possibilities, these technologies also place significant burdens on IT infrastructures at a time when insufficient investment is being made.
Traditionally, there have only been two primary choices in the management of IT infrastructures. An organization can either man- age its infrastructure in-house, or it can outsource the process to a third party, which will typically take over IT assets and run them with a mixture of on-site and remote services. There is a ‘‘third way,” often called, ‘‘the Co-sourcing model” however, combining the two tried and tested means of in-house team control with remote operations support, utilizing remote-infrastructure management. Under such circumstances, the IT department is best seen not simply as a service provider concerned exclusively with internal resources or capability, but as a resource center with the capability of integrating all internal and external IT resources with the objective of obtaining, managing, effectively utilizing and combining the technology and services required to achieve business objectives. This means that the new operational environment to IT/IS department will be more complex. IT department require an optimal operations strategy which enables IT department take good advantage of internal and external resources efficiently, so that it can concentrate on its core competences and capabilities.
Dominguez Machuca, Alvarez, Domınguez, Garcıa, and Ruız (1995) point out that operations strategy is basic to the development and maintenance of competitive advantage. The key to developing an efficient operations strategy lies in understanding each task attributes usually engaged in IT/IS department and the value that each task can generate in the department. Distinguish task attribute and assessing value-added activities can be achieved by stressing the different priorities of IT/IS task arrangement (Davis, Aquilano, & Chase 1999; Krajewski & Rizman, 2000). An organization with such operations strategy will have the capabilities enabling direct CIO of IT/IS department to set priorities for task arrangement within the portfolio of sourcing decisions in order to obtain competitive advantage and operational flexibility. Davis et al. (1999) state that the operations strategy is a long-term plan which allows the organization to determine the best way to use the IT/IS department’s resources so that the end use of the resources and task arrangement are compatible with the corporate operations strategy and objectives. Espino-Rodriquez and Padron-Robaina (2004) argue that one of the aspects that the company must take into account when developing an operations strategy is the relative extent to which operations are outsourced or performed in-house.
The decision to keep IT/IS functions in-house or contract with a third-party service provider is nevertheless entirely strategic and can dramatically impact the bottom line of any organization. Also, the factors motivating the IT department to achieve effective management might be different one another and might include factors other than cost that relate to operations objectives, such as quality, flexibility and technology acquisition. This gives companies different strategic advantages, since they must pursue different competitive priorities simultaneously in order to succeed (Ferdows & De Meyer, 1990; Johnston, Chambers, Harland, Harrison, & Slack, 1993). Consequently, the IT/IS department not only has to take good advantage of internal and external resources but also has to consider new ways of planning and managing operational activities and making sourcing arrangement for the delivery of IT/IS services. Also the role of the IT/IS department, as well as the supply of its contents to organization should be re-examined and aligned more closely to yield a successful operation result after objectives, strategy and alternatives are more clearly understood and articulated.
1.2. The research problems and goals
As is well known, a business requires constantly evolving strategies that can not only adapt to external environmental change but also identify internal value-added activities and, even more effectively, achieve the goals of management. This high value strategy is intrinsically very risky, however, since whichever mode of sourcing – In-sourcing, Out-sourcing or Co-sourcing – has been adopted, they are all conducted in complex, distributed environments. The CIO of the IT/IS department therefore requires sophisticated tools and techniques to ensure that corrective action can be taken proactively and that the tasks involved are exactly assigned and executed with a proper sourcing mode to manage IT infrastructures.
In facing the problem of how to decide the priorities of IS task arrangement and which sourcing mode to operate with a proper sourcing mode, the authors propose a novel hybrid model to optimize the operations strategy for management of an IT project. Our integrated model incorporates the decision making trial and evaluation laboratory method (DEMATEL), integrating these relation weights along with the analytical network process (ANP) and zero-one goal programming (ZOGP) to find an optimal sourcing portfolio for task execution and to achieve objectives using limited resources. Our ultimate objective was to devise a method to help practitioners evaluate how well aligned each sourcing decision is with the company’s strategic direction, and to reap the optimal benefits from sourcing decisions regarding task arrangement.
This paper is organized into six sections. Section 1 will briefly describe the optimal operations strategy and management, the research problems and the goals of this study. Section 2 will introduce the three generalized potential sourcing alternatives and conclude five perspectives of operations strategy and management as the evaluation principles of sourcing mode for the sourcing decision. In Section 3, we propose a novel hybrid model to optimize the operations strategy of management of IT projects. In Section 4, an illustrative application of IS sourcing strategy mix decisions is introduced. Discussion of this illustrative application follows in Section 5. In Section 6, we present our conclusions and future research.”
To continue reading this paper, please visit: www.reader.elsevier.com
Course Manuals 1-12
Course Manual 1: Sourcing Plan
Don’t omit crucial steps in the planning process while building a sourcing strategy for an IT transformation. Have you ever experienced underperformance after finding that your target supplier was unable to adequately replicate some essential items in your category? It’s possible that you’ll be stuck working with an unenthusiastic incumbent supplier who will only produce the essential items that the new supplier cannot, which could result in you falling short of your projected goals due to cost overruns or quality problems, or even worse, experiencing supply disruptions.
An appraisal of your own personal requirements should always come first. as opposed to merely profiling a category. It’s important to comprehend the big picture. Redundancies or overlaps between categories might exist and could either be exploited or eliminated.
You must have a thorough understanding of the capacity and abilities of the supplier base. Included in this are any specific performance qualities that can give your business a competitive edge.
• Are the correct items in the correct categories?
• Are there any unique characteristics in your category that few vendors could match?
• Is there any patented technology that can only be obtained from a single source?
• What matters most to your business besides being able to produce the item or provide the service efficiently? Innovation? Leading Times? Worldwide Presence? Almost anything that is significant to the strategy of your organization might be on this list.
You can examine the spending across categories and determine what capacities and capabilities you require the supply base to provide in order to support the strategy of your firm by doing an internal needs analysis.
What constitutes a sourcing and procurement process plan’s essential components?
Organizations utilize strategic sourcing, a fact-based and methodical strategy, to manage their (IT) supply chain as efficiently as possible. The strategy focuses on enhancing the value proposition’s overall quality. This means that it doesn’t focus solely on price but also on making sure that the organization has access to the appropriate services when needed and in the requisite quantities at the best possible price.
Making decisions during the process requires using data gathered through market research and analysis. This ongoing procedure is cooperative and not limited to the organization’s purchasing functions. The method is designed to provide the greatest products or services at the lowest cost.
Planning the sourcing and procurement process
The plan you build must guarantee:
• Delivery of the advantages specified in the strategy when necessary; and in a manner that satisfies the business need, whether you are creating a local or international sourcing plan.
• The implementation of the adjustments follows a realistically determined timeframe in order to guarantee their success.
• Identification of process-related hazards and incorporation of the necessary corrective actions into the plan.
A solid strategy should include:
• Realistic deadlines that take significant failure rates into account.
• Planning and communication that is appropriate for the stages of production and implementation.
• Identifying the business operations that would be adversely and indirectly affected.
• Identifying important checkpoints and gauging process outcomes.
How to create a sourcing and procurement plan in three simple steps
Strategic sourcing goes beyond haggling with vendors to get better costs. This strategy accounts for the whole cost of ownership. This comprises the people who are driving demand for the products and services, internal processes, technical requirements, and operational procedures.
Therefore, developing a sourcing strategy entails more than just looking at the lowest rates. There are several steps in the usual sourcing and procurement process plan.
Step 1: Identifying opportunities
Opportunities or needs are frequently created by an organization’s requirements for a service or product. In this process, the user (internal customer) determines the need and informs the procurement services function of the service or product requirements.
Typical product specifications include:
• Components
• Finished Products
• Equipment
Typical service specifications include:
• Computer programmers
• Other service providers
Step 2: Analysis of the specifications and needs
This step entails analyzing the circumstance that prompted or produced the demand. This step could involve a study of the operational procedures that underlie the need or the purchase requisition, depending on the necessity and request made.
Purchase requests include a description of the specs and requirements. Information about the following should be included in a good request:
• The day the request was made by the department. This indicates the starting point of the tracking cycle.
• The deadline by which the company needs the service or item.
• A summary of the necessary service or product.
• The breakdown of service expenses or the expected cost of a single item.
• which part of the operational process should be subject to the requirement.
• A signature of authorization.
For the purchase of both goods and services, a procurement request is essential. It explains in detail what is needed and for what reason to the procurement services.
Statements of Work should only be submitted when services are necessary. These include thorough explanations of the work as well as the deadlines. Additionally, it provides details on the services that are needed as well as requirements for the service provider. A contractor may offer these services on- or off-site.
Step 3: Strategic Analysis
The most important phase of the entire procedure is this one. The procurement function must find areas for improvement in this step. Working closely with suppliers and internal customers is required for this level. The procurement function must examine the mechanisms generating demand and find ways to reduce waste and improve value delivery.
At this point, locating areas within business processes shared by many units is crucial. Even global sourcing may be used by a company to satisfy the needs of several departments.
The evaluation of suppliers is a part of this process as well. Companies may already have a list of current suppliers, and they should take those with a strong track record into consideration from this list. However, businesses can also take into account a list of new and potential suppliers.
An extensive assessment of suppliers is required when significant purchases or a global source are involved. This entails assessing the suppliers:
• Facilities and equipment: Does the provider have the newest or most modern facilities and equipment? Does the provider have the capacity to grow should demand rise?
• Internal processes: Are the supplier’s procedures well-established? Has the supplier had a proven quality control system? What are the workplace circumstances? How long does a cycle typically last?
• Information systems: Are there current information systems available from the supplier? Does it regularly train its staff to make sure they have the skills necessary to do the job well?
• Management capabilities: Has the provider established quality goals? What is the strategic vision of the supplier? Is the staff the supplier offers reliable to work with?
Organizations can maximize their expenditure and value contributions in a way that supports their entire IT strategy by defining and putting in place a strategic procurement approach. Organizations can develop a clear plan for their departmental functions with the aid of standardized processes that have understandable inputs. These processes also provide meaningful forecast, cost, and earnings/budget data. Additionally, it enables the delivery of operational data to support firms in achieving their strategic business goals. For all facets of the firm, the strategic procurement process is utilized to gather and manage expenditures.
• Capital assets, such as structures, equipment, and vehicles
• Utilities, such as water and power supplies
• Fuel such as diesel, gasoline, and heating oil
• IT tools, such as software and hardware
• Legal services, freight forwarders, accountancy, human resources, sales, and marketing are all examples of business support services.
Conduct a needs analysis of your own
In order to build a procurement strategy, this step aims to benchmark existing performance, then identify needs and targets. This necessitates the gathering of numerous types of data. To benchmark current performance, resources consumed, expenditures across all organizational departments and functions, and current growth estimates, initial data collection is done. This information could involve a variety of analysis, including:
• Expenses and values for all activities and assets, including management costs, costs for internal and external suppliers, and costs associated with processes
• Levels of resources, such as labor, area, utility use, turnover, and replacement
• Technology, including the state of information and communications systems, the age and capacity of industrial equipment, and any replacement plans
• Assets, rights, licenses, patents, and intellectual property, such as copyrights
• projects, such as marketing efforts and research and development
• Inventory levels and completed goods and supply management systems
• Production, capacity, distribution, sales, returns, and turnaround time are some examples of performance.
• Financial information, such as estimates of earnings, cash flow, growth, taxes, borrowing costs, and investment returns
• Economic information, such as forecasts for the economy, global monetary trends, currency fluctuations, commodities indexes, market intelligence, and activities on the supplier market
• Forecasts for growth, such as sales and earnings
Responses from suppliers and stakeholders
In addition to giving a general overview of operational efficiencies and effectiveness, this analysis activity pinpoints how the business is currently adding or producing value.
During this process, departments frequently discover cost-saving opportunities and possible efficiencies that might be adopted with little to no expenditure.
It is vital to identify gaps based on the existing estimates in addition to evaluating the current data (gap analysis). Requirements for this data analysis may include:
• Production potential
• Labour
• Physical location
• Investment in infrastructure, such as production, IT hardware, and software
The following advantages result from using internal reviews of an organization’s operations to gather data for value chain analyses:
• Establishes the organization’s value chain based on the Porter model.
• By determining what matters to customers and what has a direct impact on their perception of the value of the product or service, the company can categorize its activities into those that are customer-facing and those that are not.
• Make a distinction between the organization’s core operations and those that are not essential to its brand, customer perception, or value. The organization’s core activities are those that it cares about and believes its customers value.
• Evaluates the fundamental tasks to identify ways to improve them
The competitive advantage most matched to the core activities can be determined using this technique. The strategic procurement team may then create procurement targets and priorities that complement the organization’s overall strategic business objectives using all of this information for each department/function.
Course Manual 2: Building a Procurement Team
Roles and responsibilities for the procurement team
What is the procurement team’s function, and what ought to be its primary goals?
When starting the process of assembling a procurement team, that should be your first question.
Before we examine how an organization should implement these functions, let’s first take a closer look at some of the major advantages that a procurement function may provide.
The following are a few of a procurement team’s primary duties:
Centralizing the purchase process
When the company is small, few employees make purchases of goods and services. As the company expands, purchasing is distributed among various departments.
If you make a product, for instance, the production department buys the raw ingredients (often called Direct Spend).
All the hardware and software needed to run the business would be purchased by the IT department.
Ordinary items like office supplies and other things are typically bought by office managers.
This strategy results in additional purchasing silos as the company expands, and each department begins to forge connections with its suppliers.
Having a central procurement team means that purchasing is concentrated in one location, and by having one department handle all purchasing-related tasks, you may increase productivity. The more quickly you consider centralizing purchases, the better. It becomes a change management nightmare if you wait too long. The longer it takes for a procurement staff to centralize and standardize the process, the longer people have been making their purchases.
Even when you have several locations, having a consistent function helps boost production and efficiency at each location. Consider a central procurement function that is yet sufficiently dispersed to allow each location to make judgments that are advantageous to the company.
Cost-cutting and cost-management
The reduction of costs and cost control are the obvious advantages of centralizing procurement.
Without a procurement staff, there is no established approval or purchasing procedure.
Without a valid purchase order, employees make purchases.
When the invoice appears, the finance teams are informed about the Spend.
By then, it will be too late for the organization to keep the Spend under control.
A central procurement function’s job is to standardize the purchasing procedure and establish fundamental cost controls, such as requiring employee consent before making a purchase. This enables management to assess the Spend ahead of time and cut unnecessary expenses.
Implementing simple purchasing controls and procedures can help businesses save 2 to 3 percent in cost reduction, according to SpendMatters research. The team may benefit from understanding the buy synergies, which will result in cost savings, after the fundamental purchasing controls are put in place.Cost savings is a subject all on its own, which we have already discussed. But the procurement staff may primarily achieve two types of cost savings.
Soft savings – also known as cost aversion. Tighter buying controls and vendor negotiations to reduce YOY cost growth are to blame for these reductions. Although it doesn’t cut the budget, it does assist the business in successfully allocating capital and preventing budget surprises.
Hard savings are budget reductions that produce real savings. For instance, if a business buys a widget’s raw materials for $X per unit, the final cost will now be $X-1 per unit. The impact of cost reduction will then be visible in the Cost of Goods Sold (COGS) line item if the volume stays the same.
Your unit economics should be improved by the cost reduction.
Compliance
The need of purchasing compliance increases as your business expands. There are different levels of purchasing compliance, but at the most basic level, you must have effective purchasing controls.
To stop procurement fraud, purchasing controls are implemented.
Without safeguards and job separation, it is simple for an employee to commit procurement fraud. One person might, for instance, create a purchase order, input an invoice, and pay the supplier all at the same time.
Tighter controls also serve as a necessary prerequisite for Sarbanes Oxley (SOX) compliance, which is another advantage. If you want to attract investors, your company needs some fundamental controls.
Consolidated contract administration
A corporation should concentrate the contract management function with procurement, depending on how your procurement team is set up.
Without a procurement staff, each department may be in charge of handling its own contracts.
There are a few problems with that:
1. There are no contract standards if there is no central contract management function. This arrangement can expose your business to unnecessary danger.
2. Contract compliance cannot be ensured if the contracts are managed by various departments.
3. There isn’t a single location where all contracts may be found. They are typically with the workers who negotiated them, and if those employees have left the company, it might be challenging to locate those contracts.
Having a procurement team permits central management of the contracts, and by working with the legal department, they can make sure that standard contract requirements are followed.
Management of Risk
Risk management is the other crucial task a procurement team performs. There are various forms of risk, and depending on your business, you may or may not need to take them.
Numerous risks can affect a supply chain, but for now, let’s focus on some typical threats.
What function should the procurement team have within your company?
It is crucial to comprehend the significance of procurement for two reasons:
• Objectives for procurement must be in line with those of the organization. The first step in doing that is to establish specific goals for the new procurement department.
• This baseline can be used to determine the skills your team needs in order to achieve organizational goals.
How do you determine the goals of a procurement?
The definition of the procurement department’s goals is the next logical question.
Although it doesn’t vary from company to company in terms of tactical aspects (operations, process, etc.), it does from company to company in terms of how procurement is viewed.
The wisest course of action would be for you to refrain from assuming that what worked in one company will work in another.
To begin, interview your most important stakeholders to determine what they expect from the procurement department.
How do you begin?
What happened that motivated you to start a procurement department, exactly?
The objective is to identify the core problems within the organization, whether they are with the people or the procedures.
Imagine they give you an example of unlawful expenditure and how it results in unanticipated costs. then you are aware that compliance is the main need.
Let’s use another illustration: when they discuss how rising costs are reducing EBITDA margins, you can tell that cost reduction is the top priority.
To better comprehend the problem, you can ask a more clarifying inquiry, but this exercise should give you an excellent place to start.
Talk to important operational stakeholders next. The objective is to determine the main expectations for procurement. Here are some reasons why you should.
• The main benefit is that it gives you a solid foundation. Your stakeholders will be pleased that you made the time to learn about important business concerns before creating a strategy for how to assist them.
• You will gain knowledge of the key levers you need to operate in order to create great stakeholder involvement.
• You can use it to design a strategy and identify the skill sets you would need to hire. Consider the scenario in which your stakeholders inform you that you must collaborate with someone who is familiar with our industry. In that instance, working with that stakeholder requires in-depth category expertise.
Who are the internal stakeholders you should consult?
Start with your company’s chief operating officer (COO) or a position with a similar title. The objective of this exercise is to determine the main expectations they have for procurement.
Please keep in mind that the objective is to understand what support they need, not to tell them how you can help.
The following are a few typical situations:
• We need to make sure that we are using the allocated capital appropriately because we are expanding very quickly. Then, stakeholders require visibility that will enable them to influence daily business activities.
• To accelerate vendor orders, many personnel within the business are calling and pursuing such orders. If we could free up those resources, we could concentrate on operations-related tasks.
• You should ask them for the names of 4-5 more stakeholders after you have understood their main requirements.
• once your conversations with the various stakeholders have been completed. Act as follows:
1. jot down key goals that the procurement department must achieve to reach its aims.
2. Important demands made by various parties.
Structure of Strategic Sourcing team
We discussed the function of sourcing’s total contribution to procurement. The optimal way to organize the sourcing team is now the topic of discussion.
This exercise’s objective is to align your team’s resources with the demands of your stakeholders.
Difficulties hiring procurement specialists
For many procurement businesses, finding top personnel is a struggle, especially in the dynamic world of today.
A decade ago, perhaps, a distinct set of skill sets were needed for procurement. The emphasis is shifting away from cost savings and toward encouraging innovation.
According to a recent Deloitte poll, 51% of chief procurement officers lack the necessary skills and talent to add value to their organizations.
Hard and soft skills are equally important for procurement professionals, as we previously mentioned.
Finding unicorns that are equally adept at stakeholder management and hard skills in procurement is difficult (soft skills).
We have found that it works best to rank the skill sets as must-haves versus nice-to-haves. The must-haves serve as your minimum requirements that any possible hiring should fulfill, while the nice-to-have talents are those that a potential recruit can later acquire through additional training.
For instance, if you require a great negotiator to concentrate on cost containment, but that individual lacks soft skills, you can definitely make up the difference by engaging directly with stakeholders.
Once more, it relies on your bandwidth and your tolerance for compromise.
With that said, those are the two common strategies for acquiring personnel in procurement. When we refer to procurement talent in the strategies below, we really just mean strategic sourcing.
Hire for domain knowledge and train for procurement skills
By employing individuals with domain knowledge and then training them in procurement abilities, procurement professionals are attempting to alleviate the talent shortage in their field. You can always teach people procurement skills later, goes the justification.
Consider that you are building a procurement department and that you require extensive domain knowledge (direct Spend). In that scenario, using this strategy to kick-start your company’s procurement campaign can be a good idea.
Where it is logical?
These hires are more typical for industries where recruiting someone without domain expertise won’t be successful. For really technical categories, this is a typical situation. These are frequently internal employees.
It is always preferable to hire someone from the stakeholder team you serve because you are looking for someone with domain expertise.
For instance, it makes sense to hire someone from engineering and teach them in procurement abilities if you are supporting an engineering department.
The other typical circumstance is where Procurement has low stakeholder participation; in this case, a method to raise stakeholder engagement could be implemented.
For instance, let’s say you wish to get involved with marketing spend but have never supported the marketing division previously.
The ideal course of action would be to hire a member of the marketing team and teach them in procurement abilities.
The strategy works best when the procurement expert needs industry-specific knowledge to interact effectively.
Hiring someone internally makes sense in each of the aforementioned scenarios since you benefit from the topic expertise and on-the-spot involvement with stakeholders.
One word of warning with this strategy: make sure the internal hire entirely relinquishes their operational responsibility before moving into a procurement role.
Employees frequently migrate to procurement while continuing to support a portion of their previous operational tasks.
Hire for procurement skills and train on domain knowledge
In this situation, you are bringing in outside procurement talent who may or may not have industry experience.
The underlying premise is that while subject expertise is crucial for the operation of the procurement department, it is not absolutely necessary.
The ability of the new hire to quickly acquire the necessary subject expertise is the other fundamental premise.
Where it is logical?
Your primary area of attention when starting the procurement department would be indirect goods.
If you work in the service sector, the majority of your expenses fall under the category of indirect spending, therefore you can get by without having any specific subject knowledge to begin with.
The objective when employing a generalist should be for them to achieve some fast victories so that you can prove the procurement value.
If you need a specialist to bring additional Spend under management, you can easily recruit them later if they have the necessary domain knowledge.
One word of caution: make sure your procurement staff has experience with similar tasks if you intend to teach them in domain expertise later.
Not the same, but similar—note that. For instance, you shouldn’t anticipate the individual you’re recruiting to become an expert in clinical research if they have a strong experience in sales and marketing.
However, with the right training, a person with experience in sales and marketing can manage legal sourcing with ease.
Course Manual 3: Spend Analysis Part 1
Asking the right questions
Collecting purchase history data is the first step in using spend analysis to derive relevant information about an organization’s spending. Considerations for this including items, costs, volumes, suppliers, organizational units, and payment conditions.
Spend analysis can assist you in performing an assessment of future performance as well as trends by using these leading questions as a guide. When conducting cost analysis, we primarily consider the following questions:
• What do we purchase?
• What have we already paid?
• How much have we purchased?
• From whom are we purchasing?
• Who is the buyer?
• What terms did we purchase on?
• How frequently do we buy?
• When did we purchase it?
• Do we receive what was promised?
• Where (in terms of geography) were the things delivered?
• How do the numbers stack up against earlier years?
Where does spend data originate?
Finding pertinent spend data sources is the first step in any project involving spend visibility.
So where do you even begin?
The most popular sources of information on procurement spend are listed below.
Here are a few of the most popular places to find information on procurement spend.
• Business Resource Planning (ERP) instruments
• General ledger data, or financial information about an organization
• Purchase orders
• Data on purchase orders shared by suppliers
• Risk evaluations
• credit ratings, risk assessments
• transaction data from internal systems, external sources, and other systems
Data extraction from several sources is a very difficult and sophisticated process.
Direct vs. indirect procurement spend
Spending information can be divided into two main groups: direct and indirect.
There is frequently misunderstanding regarding direct and indirect spend. Let’s go over definitions and examples for the two major procurement categories.
In the context of procurement, “direct spend” refers to products and services that are directly tied to product production. Examples could be things like raw materials, parts, equipment, and services used in production.
The sourcing of commodities and services not directly associated with the production of goods is known as indirect spend in procurement. Businesses can continue to grow and maintain their operations thanks to indirect procurement.
Following are some examples of indirect spend categories:
• Professional services; marketing services (media purchases; agency costs); (consultancies, advisors)
• HR-related services; information technology (hardware, software); (recruitment, training)
• Utilities (gas, electricity, water)
In the manufacturing sector, direct material spending makes up the majority of total spending—up to 80% of the total spending—in some cases.
Spend categories in procurement
Spending on both direct and indirect procurement can be categorized, allowing for the analysis and control of related products and services.
A spend category is a logical collection of identical goods or services that are being paid for and that have been precisely defined at the organizational level. For instance, the spend category “information technology” may be thought of as including both IT hardware and software.
A procurement organization organizes its spend according to hierarchies using a spend taxonomy. A tree-like representation of spend categories with multiple branches for many levels or subcategories of spend is one way to look at them.
A spend taxonomy might have three to six levels of categories and subcategories, depending on the demands of the procurement organization.
Internally, with important stakeholders including finance and regional/global category managers, a taxonomy design must be thoroughly discussed and harmonized. Accurately classifying your data depends on having a thorough understanding of each subcategory in the taxonomy and its definition.
Since you finally want to know what you are spending your money on, how much you are spending, to whom, and whether there is room for cost reductions, accuracy is crucial. The creation of subcategories that are unclear or vague, such as “Miscellaneous things” or subcategories that are not MECE, must therefore be done with caution (Mutually exclusive, collectively exhaustive).
Additionally, there are common coding systems for describing commodities and services, such as the UNSPSC (United Nations Standard Products and Services Code). Even though these are frequently not the best for strategic sourcing, it may be utilized to categorize procurement cost.
However, common taxonomies can be utilized as a basis for developing a spend taxonomy that is unique to your firm. The UNSPSC’s standard procurement categories are:
• Industrial equipment and tools
• Components and supplies
• Equipment and supplies for construction, transportation, and facilities, and pharmaceuticals.
• Equipment and supplies for the following industries: Food, cleaning, and service industry, Business, communication, and technology, Defense, security, and safety, Personal, domestic, and consumer Services
Spend analysis in procurement
KPIs and metrics
A variety of metrics or key performance indicators (KPIs) that are important to the procurement organization can be used to slice and dice procurement data. They are there to assess the performance and efficacy of procurement management. Additionally, effective KPIs assist you in finding potential for cost reductions, controlling supplier risk, and streamlining procurement processes across business units.
These five categories best describe the typical important KPIs for businesses:
1. Cost-cutting
2. Spending that is controlled
3. Performance of suppliers;
4. Operational KPIs
5. KPIs relating to employees
Tip: You may assess and monitor your performance in real-time by viewing KPIs in a dashboard. You can find chances for improvement with the use of a dashboard.
Spend visibility
Spend analysis is frequently seen as a component of spend management, which is a much wider field. The ability of a company to have a thorough understanding of the data that support increased cost savings, process effectiveness, and supply-chain performance is known as visibility in the spend management space.
Spend visibility enables analysis of previous spending, which can be used to determine future course.
Spend visibility provides a thorough and comprehensive view of how money is moving through your business, going beyond simple spending tracking. Consistent spend visibility enables you to see information about suppliers, spend, and compliance by cleaning, categorizing, and analyzing expenditure data.
Imagine you are the CEO of a mid-sized business with 300 or so employees. Imagine that you are out of paper and pens. What would you do if you were aware that the money allotted for office supplies was nearly spent?
To answer that, you must ascertain how much of your office supply budget has already been used up and whether additional spending is permitted without going over. This essentially sums up how it will be spent.
Most businesses would have ordered the office supplies even without spend visibility, which is in this case a live tally of how much of your money has already been used. They wouldn’t learn that they went over office supply budget until until finance releases a quarterly report.
The key to outstanding procurement success is spend visibility. It offers a look at the essential elements of spend categories. Businesses may use their reports and insights to improve performance and make better business decisions if they have better expenditure visibility into their sourcing efforts.
Spend analysis benefits
Organizations involved in procurement can benefit significantly from spend analysis. Let’s dissect them to explain each benefit in more depth.
Achieve full visibility into all corporate spend
Better visibility and useful expenditure knowledge are the main advantages that spend analysis may offer to a business. Spend analysis provides a company with more information about the money it spends on goods and services.
It enables the procurement department to examine the heart of their costs and purchases. Before analysis can be done, a lot of duplication removal, cleansing, and classification may be required because the data required for expenditure analysis is frequently gathered from several systems throughout an organization.
Only by utilizing spend analysis to its maximum potential can organizations ensure data consistency and accuracy. Spend analysis not only provides a deeper understanding that can be used to develop projects and make sure-footed spending decisions, but also gives them a more efficient approach to gather, store, and manage the large quantity of data they have.
Identify savings opportunities and realize incremental savings
To reach your cost-cutting objectives, you as a sourcing manager may want to perform a spend analysis. After all the numbers have been crunched, the metrics that are produced will display spending trends and possible cost savings across a variety of areas.
Purchasing managers may therefore be able to reduce costs by adopting alternative items, consolidating suppliers, and grouping things that were previously acquired separately into contracts that can be negotiated and signed jointly.
Contract purchasing, increased contract compliance, and a decrease in ad hoc expenditure can all lead to price reductions. Additionally, indirect costs such as office supplies, contract labor, and consultancy services can be reduced for organizations.
Streamline and centralize procurement process and other administrative efficiencies
Spend analysis has been shown to help many firms drive cost effectiveness and process efficiency. Detailed information arranged around many dimensions can significantly improve every activity, from financial reporting to budget preparation.
Spend analysis performed by a more effective procurement function will lead to deeper relationships with fewer important suppliers and fewer staff members needed for unneeded assigned activities.
The cycle time for producing reports and ad-hoc analysis will be drastically reduced, which will lower personnel expenses or free up time for more productive work.
Manage risk and maverick spending to ensure compliance
You may more accurately determine the entire supply chain failure risk for your firm when your spend data is enhanced with supplier credit scores and other revenue information. You can track and discover suppliers who have non-contracted expenditure as well as spend with non-contracted vendors with the use of good spend analysis data.
You can determine the spending categories where there may be an excessive number of unrestricted suppliers. Pricing reflects contract risk, which can be due to a lack of orders or, conversely, a failure to scale up quickly enough to produce the volume of goods and services necessary.
Lower expenses are frequently the result of the vendor’s reduced contract risk. Savings can be generated through contract compliance information, and the firm can use spend data to prevent supply chain interruptions by enhancing it with supplier risk information.
Evaluate supplier performance for better relationship management
Information is the foundation for better supplier relationships and procurement performance. Data and information on the potential benefits of enhanced supplier relationships are available via spend analysis. After identifying which suppliers provide the best value, the company can collaborate with them to develop more sophisticated inventory management and procurement procedures.
To support proactive supplier development, procurement professionals can monitor their suppliers’ performance. By continuously monitoring pricing, companies may also weed out underperforming suppliers and improve contract compliance.
By recording indicators that assess performance, scorecards assist in evaluating suppliers and vendors. With thorough spend analysis, it is possible to learn more about how much a business spends and which suppliers account for the majority of that spending.
The organization can make the most of its procurement budget by using this information in contract negotiations. When executed effectively, this lowers the number of pointless vendors, increasing value and providing a leaner, more effective procurement process.
Benchmark internally
Spend analysis gives you the chance to compare your internal performance to that of other business units in other places. This makes it possible to make relevant comparisons that can be applied to making strategic decisions.
You may respond to a larger range of inquiries, such as the average number of vendors or spend by category, and which vendors are producing the largest cumulative revenues, by gathering and organizing spend data in one location. To develop realistic and attainable goals for changes, it is essential to comprehend this.
Leverage spend data across business units
Spend analysis systems’ data extraction and analysis play a significant part in the strategic planning of the procurement function. To accomplish their business goals, other internal business units can use spend analysis as well.
To better understand business spending, for instance, the finance department can use spend analysis in the same way that procurement does. To produce more accurate accounting reports, finance professionals might use expenditure analysis tools to evaluate data from sources such purchasing cards, invoices, requisitions, or invoices.
Work collaboratively with other organizations
Each organization should create its own strategy for achieving savings and efficiencies. Working in a group, though, can result in a more potent strategic approach. To save money and/or get better contract conditions, a collection of companies may opt to pool their purchasing power and buy goods and services that they frequently use.
The organization can determine the most efficient time to do a joint competitive request for those frequently purchased goods and services thanks to a collaborative spend analysis project. Knowing exactly which group members are making those purchases of goods or services can already help to produce savings and efficiencies for everyone concerned.
It is simpler to gather everything in one place if all the data is presented in the same, consolidated style. Your joint efforts will often become more strategic as a result. Savings opportunities are easier to spot when common suppliers are quickly identifiable. The cornerstone for more proactive and strategic conversations with other buyers in the buying group is a collaborative expenditure analysis.
Course Manual 4: Spend Analysis part 2
Best Practices in Spend Analysis
Now that the fundamentals have been addressed, let’s look at some tactics used by businesses with the most effective spend data management initiatives.
These spend analysis best practices are the result of our nearly two decades of expertise assisting corporate firms in converting their spend data into useful insights.
1. Classify spend data at a detailed level
Spend analysis is proven to be most successful when categorizing at the item level. In addition to increasing visibility, this also permits greater delineation of each attribute, allowing for estimations and comparisons. Aim for accuracy of at least 95%.
Although categorization at a higher level offers advantages of its own, item-level classification is more useful since it provides a detailed picture of expenditure with each supplier and for each good.
2. Adopt a common classification schema in the company
Organizations ought to implement a standard classification scheme or internal taxonomy. For instance, UNSPSC offers a metadata layer that is widely used for managing and organizing spend data.
This uniformity is essential for correct spend data arrangement, correlation, and the creation of studies that can be put into practice. These standards give enterprises the flexibility to map all spend data to a single schema and are frequently wider than internally defined classification codes.
3. Pursue a permanent solution versus one-time efforts
Due to the quantity and complexity of spend data within a business, using conventional, labor-intensive techniques and systems is not advised. External services typically offer a short-term fix, necessitating ongoing consultations between the companies and the consultants in order to keep data current.
Additionally, outsourcing hinders the organization’s ability to acquire process knowledge and expertise, increasing its reliance on consultants in the long run. Organizations can benefit from monthly updates to their spend data and more effective operations for looking at the expenditure categories by using a more dependable and uniform procedure.
4. Have an automated approach to cleansing and classification
The data classification rules and properties for a variety of spend categories are captured by automated spend analytics solutions. These solutions can present what the sourcing specialists know into the system because to their capacity for self-learning. However, commodity managers will occasionally need to categorize exceptions.
Accurate and repeatable spend assessments are made possible by establishing automated extraction methods to combine and refresh data on a regular basis. Automation also enhances the frequency of analysis, which is crucial given the dynamic nature of the corporate environment, where prices are always changing and contracts are constantly coming to an end.
5. Access all spend-data sources within and outside the organization
Sometimes your suppliers, vendors, or other affiliates have more accurate information than you have. Companies that have access to expenditure information from all pertinent sources can get a more complete and accurate picture of their overall spending.
6. Continuously improve and expand the scope of spend data management program
The method of managing spend data is always evolving. The purposes and breadth of expenditures, as well as the capacities for data purification and classification, should all be constantly expanded by organizations. Reviewing past performance will assist pinpoint areas that need immediate attention and show how successful a program has been in raising overall performance.
7. Collaborate with IT and other key stakeholders, like finance, in the whole process
A collaborative collaboration between procurement and other business units must be established in order to realize all potential savings, and everyone involved must be held responsible for the outcomes. Collaboration throughout the whole procurement organization is necessary to leverage spend data.
Together, procurement and finance can develop processes that accurately identify and deliver actual financial savings to management. In turn, this establishes a constructive feedback loop for raising performance.
8. Define category strategies and measure impact
Create category plans that are in line with the company’s goals and the interests of its major stakeholders, using a strategic approach to increase profitability, lower risk, and efficiently manage the supply of goods and services.
These strategies and efforts should be influenced by these plans. These strategies’ commercial impact will be evaluated and confirmed after a comprehensive examination to see if adjustment or repetition is necessary.
9. Take actions based on data insights to deliver savings opportunities/ savings program management
As it provides insights into what the firm buys and how it makes purchases, the data offered by the procurement teams may prove to be useful. These observations and suggestions need to be turned into practical solutions that result in financial savings. Implement these tactics and make sure that they result in chances for savings.
Why Spend Analysis Projects Fail
Despite the fact that the business had a critical need for efficient spend analytics, many organizations attempt to address the issue of spend visibility, but these projects frequently fall short of the initial expectations for return. The following are some causes of spend analysis project failure.
Poor quality data/ dirty data
The low quality of the data is the primary cause of most spend analysis project failures. There are occasions when suppliers have data that is more accurate than what the organizations’ systems can offer. Many businesses devote 80% of their work to cleaning up data.
Basic hygienic problems like blank data fields and misspelled words are frequent instances of unclean and inconsistent data that might obstruct analysis. Although unstructured data is frequently included in various business systems, an efficient classification and analysis of expenditure data requires extensive information.
The data is frequently riddled with mistakes and contradictions between departments, or important data fields—like supplier name, product features, or account codes—are missing. Words can be shortened, parts/item descriptions for the same category can differ dramatically, and supplier names can be misspelled.
Complex and labor-intensive cleansing and classification process
It can be difficult for huge corporations to categorize their billions of dollars in expenditures. The issue is not just the amount of spending, but also the enormous quantities of data that are tied to spending that could take years to properly categorize.
Regardless of how difficult classification may be, value must be produced at this granularity.
Human labor alone cannot be sustained since it would be difficult to keep up with the steady flow of data while performing the same time-consuming tasks repeatedly. Other approaches, such as limiting the classification of spend data to the top-level commodity class, offer insufficient information and frequently produce inaccurate analysis.
No solution will ever provide you with completely classified information. The most important thing is to include the right checks and balances so that most problems can be found and fixed right away. By ensuring that this is done regularly, it will be possible to uphold confidence in the data and the classification process and ensure that the data is consistently used for future decisions.
Leaders without a data-driven mindset
The failure of some spend analytics projects can also be attributed to the leadership team. Failure might be brought on by a lack of adaptability and ongoing leadership sponsorship or involvement in the analytics process. Many corporate leaders may be reluctant to adopt a more data-driven strategy because they like the tried-and-true method of doing things.
The highest management may not be the ones who actually put the strategic application of spend analysis insights into practice. Although the management team does not necessary need to be actively involved, there must be recurring brief feedback loops.
The answer is to take a more relaxed stance. They will notice immediate, cumulative results if they are informed of project progress. By include them, you may increase engagement and managerial support.
Unrealistic expectations, unclear goals, and misplaced priorities
Organizations rush to gather and analyze as much data as they can all at once and without much of a plan, which contributes to the failure of many spend analytics efforts. Typically, this results in exorbitant prices and a stressed-out staff.
Big starts aren’t always the best strategy. It may seem as though there are more chances than there are resources to take advantage of when starting the spend analysis process with new, robust tools.
Begin modestly. In addition to being far more cost-effective and fruitful, it also reduces risk. Surprisingly modest data sets have yielded some of the most important commercial insights. Starting small also creates a clearer path to more intelligent company decisions and priorities, which ensures the success of data analytics.
You cannot set up spend analytics as a one-time job and start enjoying the benefits right now. It requires a strategy and must be open with prompt, strict, and regular feedback loops.
Wrong tools or having too many tools to choose from
When beginning a project like spend analysis, the appropriate tools should be used. Understanding your organization’s needs and obtaining the appropriate solutions that will deal with the present scenario are always key.
The validity of the analysis will be compromised by attempts to do spend analysis inappropriately and without the appropriate answer. Before making a choice, organizations should assess their options and consider the benefits and drawbacks of each option.
After 12 to 18 months, the majority of expenditure analysis projects fall short of their goals because they lack adequate or efficient procedures. The problems are enormous, and many solutions fall short of solving them altogether. An organization should make sure the chosen solution solves all problems and difficulties unique to its own circumstances.
Lack of skills and user competence
To address spend data classification problems, one needs a thorough understanding of both the product and the domain. The company’s varied areas of competence lead to unique and erratic outcomes.
Many firms delegate data classification and cleansing tasks to IT specialists who might not fully comprehend the components and services that need to be reviewed. Existing employees might not be able to access, arrange, and analyze spend data for long-term usage.
For instance, the appropriate expert needs to be paired with the appropriate spend items when performing a categorization deep dive in some categories where information is scarce. Poor initial data mapping may necessitate multiple attempts before the reports are meaningful.
The category teams are frequently the ones with the pertinent knowledge, but they are typically not participating. The sourcing analysts may have already lost out on important opportunities when this occurs.
Fear of losing relevance or control of data
Silos of data reduce productivity and waste money. They may occur for a variety of causes, such as structural, technological, and cultural ones. Cultural constraints that prevent data analysis from being used efficiently at their core are worries about losing control or relevance.
It can be challenging to let go of something you’ve controlled for a long time. Data owners, such as the IT team, could feel forced to share their data sets with other departments. more so if outside knowledge is incorporated to help the data analytics effort.
When technology is contained in an area that allows owners access to the pertinent data, silos are defeated. We strongly support the democratization of data, and one of our eBooks, Procurement Loves Data, contains an entire chapter on this topic.
Too many data sources/ disparate systems
Complexity and confusion are caused by numerous unrelated systems. Accounts payable, general ledger, ERPs, and other systems, among others, frequently have spend data scattered throughout them. These use various classification schemes, which makes it challenging to collect and interpret the data.
Organizations cannot effectively use expenditure analytics in sourcing activities when there are too many or incompatible data sources. Spend data must be transferred to one centralized repository in a consistent manner in order to fully benefit from spend analysis.
Limited analytics solutions
The possibilities that analyses can provide are limited when using simple spreadsheet programs as the main analytical tools. Spend analysis solutions are not provided by internal BI systems. Some businesses have robust data warehouse solutions and an IT team that is well-equipped to create custom expenditure analysis tools by purchasing report builders, but even the most robust of these kinds of solutions have a finite amount of flexibility. Preformatted reports are frequently the result, and they don’t satisfy the procurement organization’s requirements for analysis.
Therefore, a solution that is based on appropriate technical foundations and capabilities for the requirements of procurement should be taken into consideration if an organization wants to get better return on investment and genuine value from spend analysis.
Spend analysis as a one-time effort
An ongoing procedure should be used for spend analysis. Even if it takes time, it is a necessary step in your long-term procurement reform. Only doing it once will result in a single advantage. To track progressive spend versus contracts and spot changes in an organization’s spending, repeated analysis is frequently needed to make sure that real value is being delivered.
Course Manual 5: Research Supplier Market
Specifications are crucial in the pursuit of the ideal balance between quality and price. The ability and willingness of business professionals to foresee, accept, and adapt to change is one of the other essential success criteria in the modern corporate environment. By providing procurement professionals with the essential information they need to comprehend their supply markets and then apply that understanding to better supply decisions, this section strives to build on that principle.
Supplier market explained
A place where goods and services are purchased and sold is referred to as a “market.” Through an exchange mechanism, markets are developed to satiate the needs and desires of individuals and organizations. From the standpoint of the buyer, the supply market may be described as the area that houses prospective sources of supply based on this definition.
This supplier market has a significant effect on how well the procurement function performs. It serves as the foundation for creating supply strategies and undertaking supplier management actions that will have an impact on all procurement operations:
1. What to buy and how much
2. Retail locations
3. The best time to buy
Supply market analysis: What is it?
To find the ideal supply segments for the organization’s needs and to comprehend the risks and opportunities involved with these, it is necessary to study the structure, characteristics, and trends of a supply market for a specific good or service.
Why is market conditions analysis crucial to sourcing?
The level of procurement awareness influences whether a company’s procurement function makes a transactional or strategic contribution.
Employees in procurement who just think about meeting the demands of the current week are merely skilled expediters. Business intelligence is used in strategic procurement to analyze the purchasing environment and come up with the best judgments and suggestions. Strengths, weaknesses, opportunities, and dangers that affect suppliers can only be assessed on the basis of intelligence. Business intelligence also offers data on the organization’s performance in comparison to rivals, including procurement as a business activity.
The following are some benefits of using business intelligence’s analysis of market conditions:
1. It has an interest in market research because it aids in predicting the product’s long-term demand, which includes materials, components, and other items that have been purchased.
2. It helps in predicting price trends for things that have been purchased as well as how material costs are expected to effect manufacturing costs and selling prices, thus, for instance, the requirement for lower pricing may influence sourcing decisions.
3. It reveals what other products and supply sources are accessible; sourcing things from abroad might, for instance, be more cost-effective. Additionally, it locates novel goods and/or technology that satisfy the needs of the organization.
4. It encourages awareness of the many restrictions and/or conditions associated with purchasing a specific good. When deciding between a forward buying and stockpiling plan and a hand-to-mouth buying and minimum stocking strategy, information about wage trends, commodity prices, political considerations, and the like might be helpful.
5. It pinpoints the market sectors that offer the best chance and the lowest risk for a specific purchase. It offers advice on supply source security, which is crucial when sourcing sensitive commodities from abroad.
Buyers frequently overlook supply market analysis because they typically only ask a few questions of current suppliers and industry experts. As a result, there are ongoing supply issues since this encourages short-term approaches to procurement operations and results in a lack of understanding of market mechanics. As a result, purchasers can find themselves spending time solving minor issues rather than identifying risks and seizing opportunities before rivals.
An organization may experience supply disruptions, delays, quality issues, and cost overruns as a result of suppliers dealing with unexpectedly long supply lead times, material shortages, logistical bottlenecks, and a variety of other challenges that could have been anticipated if its supply markets are not monitored and analysed when necessary.
Supply market analysis
To help the User Intelligence Groups (UIG) have a thorough grasp of the main trends, influential players, and general market dynamics that could affect the creation of the commodity/service plan, such as route to market and lotting strategy, you should do supply market analysis. To aid in this effort, at least one of the available market analysis templates should be employed. Before filling out the templates, you should read the following instructions.
You should present a market summary of your findings at the conclusion of the investigation.
Projects involving public procurement can have a good effect on numerous business community sectors, either as directors or as subcontractors.
How to use Supply Market Intelligence Data to improve your Procurement
All corporate divisions, including procurement, have come to depend on accurate and pertinent data as a valuable resource. To make wise purchases, procurement specialists require market intelligence. However, shifting external variables make it more challenging to acquire pertinent data. For instance, monetary situations, geopolitical variables, and public health crises like pandemics.
When making purchases for IT transformation, procurement departments must frequently evaluate these outside factors and take them into account alongside market knowledge. We will examine the supply market intelligence that is accessible and how to source it in this portion of the course handbook.
Supply market intelligence: What is it?
In order to successfully source a good or service, procurement must comprehend the industry the supplier serves. For businesses to locate and control the supply of goods and services, they need access to external information called supply market intelligence. It contains details about markets, clients, rivals, and suppliers.
Sourcing supply market intelligence
There are numerous resources accessible for supplier market intelligence. To make the best purchase selections, procurement must conduct as much extensive research as they can to obtain a comprehensive understanding of potential suppliers.
Users of some systems can access information about supplier performance, such as annual financial trends, daily credit rating analyses, and share price indicators. This aids procurement teams in identifying and reducing failure risk.
Suppliers
Suppliers can be a good source of knowledge. They are very knowledgeable about the markets they work in, the variables influencing the supply chain, and the goods and services available. Additional details on vendors are available to procurement from:
• Corporate websites
• Annual accounting and financial statements
• RFPs
• Interviews conducted in person
Organizations may clearly comprehend the performance of specific suppliers by fusing these data sources. Additionally, it lessens the chance of selecting a provider who won’t fulfill their contractual responsibilities.
Internal Sources
If a company already knows a supplier, they can access internal records to obtain market intelligence information. A business should offer details on supplier performance (KPIs) and risk profile if it has a supplier relationship management system. Internal stakeholders can be questioned by procurement to determine whether or not they have a beneficial and functional connection with the supplier.
Desk research
There are a lot of free resources accessible to purchase, including:
• RSS news feeds
• Search engine notifications
• Trade publications
• Price index predictions
• Researcher reports
• Blogging and social media
• Websites of competitors
Although it is a good place to start and can yield useful information, an internet search shouldn’t be used as the main source of information. The data might not be impartial or pertinent to the study being done, which could result in bad decisions being made during the procurement process.
Research Services
Through a third party, you can obtain supply market intelligence in another method. The procurement industry can use a variety of firms.
Conduct independent market research and provide high-level information on market trends. The information required to make educated decisions may not be present in research because it is typically written for a large audience.
Custom intelligence companies employ a combination of internal and market data to offer research that is supported by facts. will work with suppliers directly to conduct additional study.
Depending on what a company wants, hybrid intelligence providers offer a combination of high-level and specialized market research data.
Why use supply market intelligence?
An intelligence-driven supply chain gives organizations a number of advantages.
Enhances risk management: Market intelligence is essential to the effective management of supply chain risks. Businesses can use the information to plan for various scenarios and gain understanding of supplier stability throughout the evaluation process. Additionally, it offers notifications for situations that could have an influence on a business’s capacity to deliver goods or services.
Improves supplier management: Market information can assist businesses in locating dependable, consistent suppliers. It guarantees that businesses are informed about adjustments to suppliers’ operations and are able to take measures to lessen any negative effects. When contracts are up for renewal or with new suppliers, the knowledge also gives extra negotiating power.
Enhances customer satisfaction: Supply market intelligence assists businesses in building flexible, efficient supply chains that enable them to offer affordable goods and services to their clients quickly and effectively. A deeper understanding of the market enables businesses to anticipate the demands of their clients and better serve them.
Creates a competitive advantage: Businesses that are agile frequently have an edge over their rivals. With the use of real-time market knowledge, businesses can respond promptly to unforeseen interruptions. Changing suppliers, for instance, if they seem to be having financial difficulties.
Cost savings: Because they have a thorough understanding of the market and suppliers, procurement specialists can negotiate more skillfully.
Supply market intelligence aids businesses in decision-making, quick consumer response, and competitiveness. The advantage to a firm will be maximized by those who recognize its value and know how to use it successfully. Companies will have more control over costs and the delivery of their goods and services if they have a thorough awareness of markets, suppliers, and external factors.
Course Manual 6: Suitable Suppliers
How many suppliers are necessary?
It is important to consider how many vendors you actually require. Purchasing from a carefully selected group may offer the following advantages:
• You’ll be able to manage your vendors more easily.
• They’ll start to value your company more
• You could be able to close deals that give you a competitive advantage over your rivals.
Nevertheless, it’s crucial to have a selection of supply sources and thoroughly compare the benefits and drawbacks of a single- or multiple-supplier strategy.
Choosing the best providers to contact
It is crucially critical how you find, brief, and communicate with potential vendors. It establishes the framework for your future partnership’s success as well as, to some extent, your connection.
Make a list of your basic business requirements before you start shortlisting applicants. Include the goods or services you desire, the caliber, the quantity needed, the turnaround time, and the pricing.
What to consider when narrowing down the suppliers
Research and find suppliers who have a solid history of supplying the goods or services you require after you have decided on your supplier criteria.
Consider the following queries as you build your supplier shortlist:
• Can you get what you want when you want it from these suppliers?
• Are they stable financially?
• For how long have they been in business?
• Is there anyone you know who has used them and would recommend them?
• Do they appear on any lists of authorized vendors maintained by businesses, local governments, or the federal government?
Consider the following queries as you build your supplier shortlist:
Try to reduce the number of potential suppliers on your list to no more than four or five. Approaching a potential provider when there is little probability of them meeting your criteria is a waste of time for both of you.
How should I contact a supplier?
Contact the candidates on your manageable shortlist to see if they are open to a business partnership. Give a concise brief that summarizes your requirements and provides a sense of the volume of business you want to place.
Instead of being too specific about what you want to buy, you might prefer to ask providers for their recommendations. For instance, you may describe to technology vendors what you need your new IT system to be capable of and ask them to provide suggestions that fit within your spending limit.
Compare prospective vendors
Once vendors have responded, assess their proposals in light of your top priorities. For instance, a product or service’s quality might be the most crucial factor, whereas its location might not.
While cost should be considered, it shouldn’t be the main factor in supplier selection. Lower costs could signify inferior products and services, which, over time, might not be the most economical choice. Be certain that your supplier can earn a profit at the specified price to make the company commercially viable.
When selecting a supplier, avoid typical mistakes.
Meet potential suppliers in person whenever feasible to learn more about their operations. Check to see whether they plan to use other vendors for essential supplies or services or to outsource any work to subcontractors. If yes, you might also wish to evaluate these vendors.
Finally, keep in mind that the reputation of your company may be impacted by the labor practices and environmental record of your suppliers.
Selecting suppliers for your company
Perform due diligence on suppliers
Finding suppliers requires a lot of due diligence. It’s critical to conduct due diligence on potential suppliers to confirm their legitimacy and dependability before signing a contract.
How to examine a new supplier in detail
To make sure potential suppliers have the financial flow to deliver what you need when you need it, you should first credit check them. Especially if you’re signing a long-term deal, this is crucial.
You need to make sure that a market’s sole supplier isn’t in danger of going out of business, for instance, if there are no alternatives to the goods or services they are providing. Additionally, the provider will likely do background checks on you to make sure you have the resources to pay for the goods or services.
When exercising due diligence, you could additionally want to:
• Verify business registrations and official records
• verify norms or certifications of quality
• if appropriate, request samples to evaluate the caliber of their supplies
You can make the procedure as long or as short as you’d like. How much information you provide should be based on how important the supplier’s goods or services are to your company.
Examine client testimonials and references.
Obtaining supplier recommendations from other clients is a smart approach. The vendor ought to be eager to connect you with some of its current or former customers. If not, consider what they might be attempting to conceal.
It is rare that the provider will connect you with a disgruntled client, so be careful to conduct your own research. Even while the material you find online or in supplier forums may be opinionated, it should at least offer you a general idea of how a supplier conducts business.
In some cases, a management of a company will submit bids for contracts and subsequently hand the account over to another person. If this occurs, be certain that the person assigned to complete the work is someone you are comfortable with, and that you can still communicate with the management if issues emerge.
Managing supplier relationships
Suppliers are crucial to your company’s development and your capacity to increase earnings. For this reason, it’s critical to manage your suppliers wisely in order to maximize the value of these connections.
Negotiate with your suppliers
You must bargain a deal with your suppliers before signing a contract. Costs are frequently the subject of negotiation, but this does not obligate you to seek the lowest price. You could want to haggle over additional issues like delivery dates, terms of payment, or the caliber of the products.
It’s crucial to create written contracts once you’ve finished negotiating the details of your relationship.
Concur on service levels
Prior to doing business, it is a good idea to agree on service levels so that both parties are aware of what to anticipate from the other. Clearly state your priorities and the criteria you’ll use to evaluate their effectiveness. You can reduce the likelihood of disagreements and eliminate uncertainty with the aid of a written contract.
Increase the value of your relationship with your suppliers
Aim to establish a positive rapport with your suppliers early on through transparent communication. By keeping in touch regularly, you can address any issues before they get out of hand and look for ways to improve your working relationship.
Seek out possibilities to strengthen the bond with important strategic suppliers. Describe your company’s strategy, any new initiatives you have planned, and how the supplier might be involved. For instance, you might be able to employ new technologies and materials to enhance your products with the help of your suppliers.
Reviews of supplier performance
Examine your vendors’ performance on a regular basis. Reviews are an important part of supplier performance management, which can save costs, lessen risks, and promote ongoing development in your company.
A smart vendor/supplier strategy is required for your IT transformation project
As you are now aware, a team of individuals works to make every IT transformation a reality. This typically consists of a C-suite sponsor who is supported by outstanding people from various business units and functions. Additionally, there are outside suppliers who offer abilities and skills not present within the firm.
In any transformation, these are crucial players. Companies that handle the support provided by their external technology providers well can transition smoothly from a position of legacy to a forward-thinking, digitally driven company. Those who don’t will soon understand that a company cannot completely reform itself from within.
According to a recent survey by BCG and the University of Auckland, at least 55% of businesses are dissatisfied with their digital change initiatives. And when these transitions run into difficulties, tech sourcing may be the main cause. There are many vendors available for companies to pick from, but many do not pay enough attention to the subtleties of sourcing. For instance, vendors’ goals, backgrounds, and levels of competence, as well as their familiarity with the business and preference for a transactional vs a partner relationship, differ substantially. Organizations must evaluate how the vendor’s perspective and their own fit with the objectives of the IT transformation.
Companies need to have a solid plan for working with vendors if they want to maximize the likelihood of a successful program. According to research, they ought to concentrate on the following five areas: implementation, vendor management, vendor selection and contracting, and the sourcing model.
Sourcing model
According to a BCG survey, the majority of the businesses that underwent successful digital transformations used advisory services and a mix of insourcing and outsourcing to carry out their plan. Refer to Exhibit 1. Over 92% of respondents claimed to have combined insourcing and outsourcing, while 71% claimed to have hired an advice firm. Additionally, these businesses had C-level executives in charge of the change process and planned their sourcing requirements from the beginning. In actuality, according to respondents, the CIO was the primary force behind their transformation, with the CEO (33%) and CTO following closely behind (20 percent).
It is obvious that a variety of teams is essential to a successful transformation. None of the companies in the survey relied solely on internal resources. Without vendor participation, digital transformations simply cannot take place. Selecting the appropriate vendors is so essential, which is why advisory firms that conduct market research and choose vendors for the endeavor may be so valuable. The digital transformation is supported and made possible by combining these many resources.
A significant company in the food and beverage sector remarked that when the vendor strategy is defined at the beginning of the initiative, a mix of insourcing and outsourcing is highly advantageous. The questions the team considered as they developed their approach included: What skills do we require, and are they required on our end or on the end of our suppliers? Or do we prefer a more flexible and neutral arrangement? Do we need to insource, outsource, or perhaps co-source? was the crucial query that surfaced. Our experience working with customers shows that in order for change projects to be successful, both the client and the vendor must collaborate to transform their respective operations and expertise as a result of the digital transformation, creating a kind of symbiotic reliance.
Sourcing strategy
There isn’t a single, universally effective IT transformation strategy. Companies must consider the types of providers they require and the deliverables they have in mind for each circumstance.
According to a recent study, successful businesses tended to hire specialized vendors very frequently (86 percent ). More than 70% of these businesses used a competitive vendor selection procedure, and 72% demanded that applicants present prior work. Refer to Exhibit 2. A competitive selection process boosts the likelihood of success by incentivizing vendors to provide creative and economical solutions.
Successful businesses also search for suppliers who examine the complete business case and offer fresh perspectives. However, one business expressed concern regarding intellectual property, particularly with regard to genuine innovations. It is obvious that the ownership issue needs to be resolved at the contractual phase.
Long-standing ties with vendors who are familiar with the industry can be quite helpful in some changes. On the other hand, these partners can be excessively committed to business practices that will need to be modified or abandoned. Companies must inquire: Is the vendor flexible? Does it approach the change journey with the appropriate resources, perspective, and mindset? If the response is negative, the business should proceed. For instance, a multinational banking institution made the difficult choice to leave an established partner in favor of a specialized vendor whose expertise and success with highly tailored solutions were well aligned with the business’s focus on clients.
Vendor selection and contracting
High-performing outsourcing engagements place a strong emphasis on positive working relationships and open communication. This entails developing a transparent and cooperative contracting procedure and working with vendors who have a thorough understanding of the business during an IT transition. According to the poll, the majority of businesses (77 percent) with effective change programs stated they chose incumbent IT vendors for their transformational projects, and 97% said they thought the executive team of the vendor was highly involved and thus deeply committed to the job. One 50,000-person large worldwide vendor proved its dedication to a banking institution client by making its board accessible to address issues. The chief executive of the bank added, “Knowing that [the vendor’s] management was behind it helped.
Contracting frameworks that are specific to digital transformations and not taken from older (and maybe irrelevant) IT contracts are the foundation of successful vendor agreements. Seventy-two percent of survey respondents said they utilized detailed contracts, and 57 percent said they used contracts specifically for digital transformation. Seventy-five percent stated their vendors were involved in determining the project’s scope and the execution strategy.
What distinguishes and ensures the success of a digital transformation contract? One significant corporation claimed that the focus had shifted most from output to results. Vendors must adjust to agile ways of working, which demand them to generate several iterations rather than a single final delivery, as clients change the way they want value to be provided by their partners.
Vendor management
The importance of a vendor’s experience with digital transformations was highlighted by survey respondents, who reported asking prospective vendors to detail their work histories in 72 percent of cases and asking the vendors they hired in 82 percent of cases. Although the majority of respondents (95%) thought that suppliers were honest about failures, just 56% said that vendors had given detailed information about those issues.
Companies will be considerably better able to create a strategy for dealing with the vendors they finally choose if they have access to enough information about the prior experience of possible providers. This lesson was painfully realized by the aforementioned banking organization after its reform effort had already started. It was about to terminate connections with a vendor when it revealed that the project was more complicated than expected and that it lacked the necessary capabilities. The vendor was missing delivery dates and didn’t appear up to the task. Thankfully, there was time to change direction, and the teams were able to pinpoint areas that need staffing changes or skill upgrades.
Through the team participating in the pitching and contracting processes, businesses first get to know a vendor. However, continuity is broken when a separate crew is brought in to carry out the task. Among the respondents, 73% said that the presale team of the vendor’s involvement in the transformation process was essential to maintaining effective teamwork. This gave the project a better foundation than other aspects of vendor management. Additionally, the vendor’s presale team did remain at 68 percent of the businesses questioned to carry out the digital transformation.
Participation by the vendor’s presale team in the transformation process strengthens the project more than other aspects of vendor management.
Implementation
A digital transformation’s success is dependent on staying within budget and holding vendors accountable. According to the BCG poll, 71% of businesses with successful projects said they stayed within their budgets, showing a link between careful planning and a successful conclusion. In fact, the project was completed on time and by the scheduled launch date at 60% of these businesses. Refer to Exhibit 3.
Of course, mistakes are made occasionally. Leaders must be ready to employ the contract’s provisions to keep things on track when a project threatens to go outside of its original parameters or when vendors appear to be behind schedule. According to the report, 58 percent of businesses that successfully undertook a digital transformation invoked contractual duties in cases of nondelivery, and 67 percent included incentives in their vendor contracts.
Vendor management will be crucial to the success of digital transformation programs for the majority of businesses. Vendors address gaps in internal resources and bring expertise. The necessity of outsourcing and the methods in which suppliers will best serve the project must be crystal obvious in a solid vendor strategy. Additionally, the business must choose vendors through a competitive selection process, establish working relationships with them based on knowledge of their past successes and failures, commit to a contractual agreement for work output, and closely supervise vendors to keep the project on schedule and within budget. As long as a deliberate sourcing strategy is established from the beginning, the majority of businesses may improve the outcomes of their digital change project with the assistance of vendors.
Which companies are the top suppliers for IT transformation?
Transforma Insights conducted a thorough investigation in 2021 on the capabilities of numerous technology suppliers in assisting enterprise digital transformation. AWS, Microsoft, IBM, Accenture, CGI, Siemens, PTC, and a plethora of other hyperscalers, consultancies, systems integrators, IT services providers, and industrial technology providers have all been thoroughly examined in this regard.
Assessing vendor capabilities in digital transformation
They examined hardware, software, consultancy, application development, and many more tasks as they evaluated their capabilities across 11 major technological categories, including AI, IoT, Product Lifecycle Management, Distributed Ledger, and Edge Computing.
Siemens, Microsoft and IBM are overall leaders…
According to their analysis, IBM is in third place with 49 percent, AWS is in fourth place with 43 percent, and Accenture is in last place with 36 percent. The overall top scoring vendors in the market are Microsoft and Siemens, tied at 52 percent. Only three other companies, PTC (35%) Rockwell (33%) and TCS (32%), managed to surpass the 30 percent mark.
The scores in the graph were divided into services (i.e., those provided for a particular client) and products (i.e. delivered for multiple clients). On the products axis, the hyperscalers (Microsoft and AWS) and industrial-focused suppliers (Siemens, PTC, Rockwell, and Bosch) all perform exceptionally well. On the services axis, the consultancies/SIs (such as Accenture, TCS, and Deloitte) all achieve significantly higher scores. There shouldn’t be any major shocks there considering the relative importance of each of these vendor kinds. IBM excels in bridging the two.
…but the right vendor depends on the project
The fact that every demand differs should be kept in mind while choosing which providers to use for which projects. The aforementioned chart shows the overall capabilities as they stand right now, but for many projects businesses will want to work with a specialist player who is narrowly focused on the market, like Ansys or Dassault Systemes for Product Lifecycle Management. Transforma Insights reports go deep enough to pinpoint the top vendors for particular technical fields and job functions, including hardware or systems integration. Because every enterprise deployment is unique, it is necessary to delve deeper into the reports’ comprehensive analysis.
It’s also important to remember that the market is dynamic. Particularly the hyperscalers, and AWS more so than the others, are quickly developing their products to compete with major competitors in a variety of technological fields.
Course Manual 7: Calculating Costs
Techniques for Determining and Analyzing Procurement Costs
The procurement system is the process of setting up terms and conditions for getting products and services from outside sources. Costs associated with procurement serve as a significant performance measure for procurement management. Given that it is based on cost criteria, it has a big impact on the foundation and provides a reasonable way to judge the effectiveness of the entire procurement process.
Costs associated with procurement contribute to reducing product prices while also improving vendor supply chain conditions. It is simple to increase profitability by reducing procurement costs without sacrificing the quality of the products delivered to customers.
A variety of tactics are available for organizations to lower procurement expenses. They should be aware of the many forms and components of procurement expenses, as well as the factors that contribute to their development.
What Determines the Cost of Procurement?
Procurement is the entire process of purchasing services or items for operational activities, from locating suppliers through getting the purchased products. Budgets for procurement can consume a sizable portion of a stock-based company’s resources.
Furthermore, although they are not the same thing, the terms “purchasing” and “strategic sourcing” are frequently helpful together. For instance, purchasing is the act of obtaining goods on behalf of a company, whereas procurement is the process of doing so. Therefore, purchasing is merely one of the many steps in the procurement process.
The following elements are part of the procurement process:
• Purchase planning
• Specifications evaluation
• Strategic sourcing for purchases (supplier choice and agreements)
• Funding
• The payment terms negotiation process
• Contract management
• Supervising suppliers
• Stock Management
The steps in a fundamental procurement process are as follows:
• List the specifications for the product.
• The company’s buyer receives the purchase order.
• Skilled professionals review and approve the requirement.
• The finance department authorizes the budget, and prospective vendors can make estimate requests
• Meeting with the vendor to discuss a project
• The supplier provides services and products to the company.
• All supplier receipts, packaging notes, and purchase orders are verified.
• The business pays the supplier’s invoice.
• Maintaining records for accounting and auditing
Here are five methods for analyzing and calculating purchase costs:
Utilizing Comparison, Price Analysis, and Indicators to Better Understand Costs
Compared to the majority of the other methods on this list, comparison is the easiest. Simply take the final price and contrast it with the costs other market vendors are charging for the same product. It is the most popular form of strategic sourcing, and it is typically used to products with known costs.
You can determine procurement by utilizing the price analysis approach if comparable market pricing for the goods or services aren’t readily available. All we need to do for this is duplicate the production process and give each stage a pricing estimate. The result you receive can then be compared. Instead of buying a product, the process of breaking down a service into its component parts and assigning a price to each is required.
You can also take into account utilizing an indication to ascertain whether the suggested pricing is reasonable if the goods have a public market price. Then, in order to determine whether the anticipated prices are realistic, it would be necessary to compare the negotiated and average costs. The process is a little trickier than it first appears, but for the purposes of this piece, further explanation is not essential.
Utilize technology
If a company is still keeping files, it’s time to update its information systems and purchasing procedures. Although setting up these procedures may incur additional costs, automation could ultimately result in lower costs due to more efficient purchasing and the ability to conduct routine systemic reviews. A procurement model links stock accounting and management systems with the purchasing process. Additionally, it reduces the time required for such research while ensuring more precise expense tracking.
You may compute and assess your coastlines using a variety of modern technologies. Using spend analysis software is one option. Users can keep data from invoices and other financial information with these programs. These days, numerous businesses are using this technique more and more frequently.
You have access to a wide variety of software options. For instance, you can employ an internal solution in addition to an existing one. Software as a service and licensed software are the other two often employed techniques. Each business has unique requirements. Consider what your business requires before looking at any particular solution, then choose the one that will best address your problems.
Additionally, the program is developed precisely for the size of your company. For instance, you can choose software for your small business that handles fewer data and is frequently marketed as self-service software. On the other hand, if you need software for a business, you can choose among those that offer insights from the various sourcing alternatives available to the company. Typically, they are offered as a software-as-a-service paradigm.
Manage Risks
Businesses run the risk of depending too much on their suppliers. Make sure the selection process is not primarily based on the preferences of a single important vendor. Maintaining the contract gives the organization the freedom and power to manage the choices and actions of the distribution network.
Maintains ongoing communication to lessen issues? Additionally, seek for ways to negotiate deals that offer beneficial services like free delivery or longer service contract periods in order to cut rates.
Utilizing data from efficient expenditure analysis is another technique to reduce your risks. It guarantees that you can track more effectively and find the vendors who have uncontracted spending. The groups with vendors without contracts can also be identified.
The contract’s risk may come from an inability to scale up and deliver optimal volumes or from a lack of orders. Costs can be reduced as a result of reduced risks. More savings may result from adhering to the contract. Due to the fact that it enables businesses to use spend data effectively, it also aids businesses in preventing disruptions in supply chains.
Budget Dashboard
In essence, a dashboard gives customers access to a thorough perspective of a number of issues. A spend dashboard can assist you in getting a glimpse of all of your expenditures based on several criteria. Such a dashboard may be referred to as a graphic or even a report. The spend dashboard, supplier performance dashboard, sourcing performance dashboard, and process performance dashboard are just a few examples of the various dashboard kinds. The expenditure dashboard is the one that may assist you in looking at procurement costs.
You may get an overview of company spending, broken down by category, supplier, and organization, using a spend dashboard. Keep in mind that a spend dashboard should be adaptable so that you may choose and filter the data on the displays. Spend dashboards can be effectively used to gain insights on objectives and issues.
Dashboards for procurement are also available. They operate in a similar way and provide a summary of the parameters that the procurement department requires. The dashboard’s first KPI displays information about the providers, while its second displays the compliance rate by category. You gain access to a thorough perspective of the procurement department’s operations while also contributing to brand development.
Analysis of tail spending
It refers to asymmetrical individual costing or rogue spending that is not authorized by the administration throughout the procurement process. Companies might look into purchasing information to find out who was in charge of the maverick expense, when it occurred, and what was purchased to reduce this kind of expense. Since only the administration has the power to make purchases with suppliers, it may also be advantageous to train staff on buying procedures and limit access to buy cards.
The little purchase that a business makes, known as tail expenditure, makes up a very small percentage of all purchases made by an organization. Thus, it is rather simple to overlook. However, these costs can significantly aid in managing the expenses of any organization. It is particularly typical for larger, very profitable businesses to ignore these costs. Sadly, there is little knowledge about tail spend and much less about how to control this expense.
But happily, businesses are becoming more aware of it and aware of how they may assist their organization in making greater savings with each passing year. Separating them from the strategic sourcing managers and employing the appropriate tools to maintain tail spend more successfully are two of the greatest strategies to manage tail cost.
Conclusion
In addition to the standard described below, there seem to be a number of other, less common price analyzing procedures. However, because they can only be utilized in certain circumstances, these are rather frequently used. Additionally, no one answer fits all problems. The specifics of each procurement operation will determine whether strategic sourcing is best for post-negotiation review.
Course Manual 8: Calculate Risks
Purchase Risks & How to Mitigate Them
Everyone gains from occasionally taking a few risks in their personal lives. If we all spent our days doing the same things over and over again, covered in bubble wrap and avoiding any opportunity for excitement or danger, life would get quite monotonous. But in the world of procurement, success and effectiveness are defined by predictability and the avoidance of risk. If your firm wants to provide value and save costs, managing procurement risks is crucial.
However, you must first be aware of and comprehend the challenges you face before you can reduce the risks connected to the procurement process. You’ll be on the right track if you spend a little time getting acquainted with the most typical procurement risks and how to manage them.
Why It’s Important to Manage Procurement Risks
Although acquiring goods and services for a business is the procurement function’s most apparent job, that is only the “what” of procurement. The “why” is where risk management enters the picture—achieving a crucial balance between risk and reward in order to produce savings and additional value. Every purchase, from pencils to private aircraft, leaves a trail of transactional data in its wake and brings with it a number of risky variables, such as customer satisfaction/company reputation, vendor dependability, product quality, and legal and financial compliance.
To be as effective and efficient as possible, procurement strategy must place a high priority on risk mitigation because it involves decision-making at all organizational levels and has the potential to impact every area of the business.
Typical Procurement Risk Types
Because every firm is unique, not all businesses will encounter the same levels of business risk for any particular variable. However, generally speaking, your procurement procedure will probably be exposed to possible risk from:
Lack of Needs Analysis
Your supply chain can resemble a tangle of fairy lights with a few missing bulbs if you don’t know what you need, when you need it, or who will provide it at the best price and on time. Without taking advantage of the discounts and economies of scale provided by well-negotiated contracts, you can find yourself buying too many, too few, or the incorrect goods and services altogether at less-than-ideal pricing. Rogue spending will probably be a significant issue, seriously affecting the accuracy of both financial planning and procurement strategy. It will be challenging to link spending plans to real purchasing behavior, and doing so will leave an incomplete audit trail that puts your finances at danger. If the value and accessibility of the products and services you provide are compromised, this could harm your business’ profitability, ability to gain a competitive edge, and reputation with your target market.
Taking Less Risk: We now view everything differently, from our own individual buying habits to the procurement procedures of Fortune 500 firms, thanks to big data and the ever-increasing role of information technology. With the aid of a powerful procurement software package, you’ll be able to gather and analyze transaction data for everything you buy, as well as identify usage trends and other data that will make it simpler for you to create smarter purchasing strategies and bargain mutually advantageous contracts with your best suppliers.
Ineffective supply chain management
This issue is directly related to a lackluster needs analysis. Managing your supply chain will be challenging if you don’t have a centralized, open, and simple system for evaluating vendors, as well as a similar method that is equally accessible but has been well vetted for requests, approvals, purchases, and payments. Rogue spending will be inevitable, and you run a serious chance of receiving fake invoices and other deceptive practices from dishonest merchants. You run the danger of receiving late or duplicate payments if your team spends too much time hunting down invoices or looking up terms and conditions.
Additionally, if you don’t use key performance indicators (KPIs) to evaluate your vendors, you lose out on a wealth of data that may be used to cut waste and build strategic alliances with your top suppliers. Additionally, you won’t have emergency plans in place, and your suppliers won’t have access to the data required to provide you with unique incentives or discounts.
Taking Less Risk: Setting up a vendor portal and fully automating vendor evaluation and management is made much simpler by artificial intelligence and a cloud-based, centralized software procurement solution. By delegating some of your purchase to dependable partners with restricted access to the system, you may monitor vendor performance and problems, spot negotiation openings should your needs change, and drastically reduce prices.
By defining and assigning roles for requests, approvals, and purchasing, as well as by ensuring that you receive the best deal (including discounts) and pay your vendors on time, you can also lessen or even completely eliminate rogue expenditure (or early). The procure-to-pay (P2P) process will go more quickly if all the paperwork connecting purchase orders to invoices and shipping documents have been double- or triple-checked. This will prevent you from losing potential value gains due to increased staff time or hiring costs.
Inefficient Contract Management
Contracts are viewed as much more than just a simple commitment to buy by modern procurement professionals. Without an efficient method of managing contracts, you’re giving up cost savings and exposing your company to compliance difficulties. Contracts are a strategic chance to create mutually beneficial collaborations with vendors who share the beliefs and aims of your organization.
Taking Less Risk: Negotiations are made much easier by having a central document library with terms that are automatically linked to approved vendors and extensive transactional data that can be turned into reports for marketing, finance, and upper management. Staff may construct new contracts from pre-approved templates for simple review and approval, and review and approval by your legal team ensures that the information in the contract is always accurate and up to date.
Data analysis may help you identify new sourcing options, ensure that you and your suppliers abide by the terms of current contracts, and plan for more advantageous terms and conditions when it comes time to renew.
Fraud and corruption
Some hazards are brought about by incomplete information or inadvertent inefficiencies, while others are the result of deliberate intent. Fraudulent invoices, embezzlement, and theft committed through falsified records are some of the specific hazards.
A decentralized and opaque procurement operation makes it more difficult for you to identify warning signs during risk analysis. In your pocket, out of your mind, and out of sight!
Taking Less Risk: It is exceedingly challenging for potential fraudsters to submit a bogus invoice or cover up corruption because to the procurement processes’ transparency and automation, the restricted catalogs from approved and recommended vendors, and the entire transactional information with document cross-checking. Additionally, a thoroughly documented approval process and full audit trail for every transaction strengthen your protection while making it simpler to stop illicit activity in its tracks.
Boost Your Procurement and Lower Risk
Ignorance is not bliss when it comes to risk reduction since what you don’t know can actually injure you. Making a procurement solution with automated risk management a part of your procurement strategy will help you avoid company losses, reputational damage, and diminished competitiveness.
Course Manual 9: Negotiate with Chosen Suppliers
Creating A Negotiation Plan and Advice For Better Negotiation
As one of the cornerstones of effective supply chain management, negotiating amicable contract terms with suppliers plays a significant part in the career of a procurement specialist.
Learning About the Supplier
When developing your bargaining strategy, you must first take into account the supplier you will be working with. Each supplier is unique and needs to be addressed from a different angle. You can use the information you gather from studying and knowing the provider to assess where you stand in the negotiation. Your negotiating position is stronger the more dependent your prospective supplier is on your contract.
But there are other things to consider, like the requirement for a long-term partnership with the provider. A good will compromise will frequently result in you keeping a strong working relationship, which has its own advantages over time, even if you don’t receive the best pricing or terms in the short term.
Developing Plan of Action
As was indicated in our first post, it is critical to establish objectives before beginning talks. These goals ought to serve as the cornerstone of your bargaining strategy.
The strategy should take into account your priorities, as well as which goals you may change and which ones are unalterable. What is the lowest/highest amount you will take to achieve each goal? When do you walk away from a deal?
Based on what you know about the supplier, take into account the various offers that they might make. Which of these offers, if any, are you open to accepting? And how can you reject these proposals? For instance, would you be willing to pay full price for a quicker delivery or would you be willing to put up with a slower turnaround in exchange for a sizable cost savings?
Consider the advantages and disadvantages of both your own and the supplier’s argument. How can you make use of these in the negotiation to your advantage?
Advice For Better Negotiations
Always start negotiations by stating which parts of the contract terms you are happy with and which points you want to discuss; and ask the supplier representative to do the same.
• Keep important details, such as discounts given, close at hand in case you need to recollect them later.
• Don’t create the impression that you are ready to give in right immediately or that you are open to make concessions.
• Become familiar with the standard negotiating strategies that the supplier might employ. Avoid utilizing your own techniques because they could undermine your case; instead, strive to approach honestly and have enough faith in your own argument.
• Never take the initial offer; instead, counter it with another and let them come back with an updated price.
• The best offer isn’t usually the one with the lowest price. Think about the compromises made to achieve such a low price.
• Ask for some features to be deleted from an offer if you don’t need them in order to lower the price.
Always keep in mind how the deal will benefit both parties. Don’t put too much pressure on a supplier because doing so could cause a rupture in the partnership and force them to make cost cuts in other areas, like quality or customer service. Additionally, it’s critical to watch out for pressure to accept a contract that doesn’t align with your initial goals.
7 approaches to better supplier negotiations
Your business’s engine is its suppliers. They assist you in gaining momentum, maintaining company momentum, and advancing toward your goals; nevertheless, if your provider is unreliable or the setup is improper, everything might go wrong.
Therefore, negotiating a good agreement involves more than simply pricing; it also entails selecting a partner you can depend on in good times and bad. The same thing will likely be demanded of you by every supplier.
It pays to keep in mind the effect you have on the other party’s business too, whether you’re looking for a new supplier or renegotiating with an existing one. With careful planning, you’ll be in the best possible position to negotiate and guarantee that the connection will stand the test of time.
Here are some important things to think about:
1. Clearly define your expectations for your supplier.
Consider what you genuinely require from a source first. Consider what your priorities are and what will keep your consumers happy. For instance, although a restaurant owner won’t want to cut corners on quality, online retailers may be highly concerned about the consistency and timeliness of their suppliers’ deliveries.
So consider about the finer features of an agreement, such payment terms and fixed price, and what could be a dealbreaker for you. What other aspects of the main good or service you’re purchasing are you willing to give up, and where won’t you?
Once you know what your redlines are, it will be easier to decide which areas to focus on and how to reach a conclusion.
2. Recognize the workings of your supplier’s sector.
Learn about the sector that your supplier is in next. Do your research into the industry first, from average pricing to all the lingo, if you’re looking for fresh packaging. Read up on the most recent trends or engage in more exploratory conversation with possible partners.
Finding the truth will not only increase your confidence but also make it more difficult for vendors to deceive you. Knowing what you’re talking about can help you explain your needs more clearly, and your preferred supplier will regard you more seriously.
You’ll be able to reach a mutually advantageous agreement more rapidly as a result.
3. Recognize the cost of your supplier’s purchases.
You need a reasonable anchor or reference point to base your talk on when bargaining over a price.
A good example is a worker asking for a pay raise; if they can establish they are underpaid and frame their request in the context of the industry average, they will have more success than someone who just makes up a number.
Investigating how much your supplier invests in their own business makes sense in a similar way. After accounting for their markup, you will be prepared to make a first offer, which will strengthen your position as a fair and knowledgeable negotiator.
4. Speak with your supplier’s current clients.
If you are aware of the prices your supplier charges other clients, it will be more challenging for them to increase their prices for you. So ask your provider if they’re willing to provide you with a list of client references that you can contact.
Naturally, some consumers will have different arrangements than others, with, for example, cheaper prices for making large purchases. These differences might show you how competitive your supplier is and how inflexible or flexible they are willing to be.
In either case, whatever information you can gather from current clients will be helpful when it comes time to hold your provider accountable. This information can also offer early indications of how open and reliable a supplier may turn out to be over time.
5. Discover your supplier’s top priorities.
You will also be asked questions by your chosen provider, so it’s crucial to prepare for the types of inquiries they will make. It would be foolish to enter a discussion without taking into account your supplier’s interests and any potential issues they could have, given that they also have the authority to reject new customers.
This is where understanding a certain supplier’s spending patterns, pricing structure, and industry jargon truly helps. You can form an impression of their goals and determine whether they even require your business.
You will have less negotiation leverage if they are a large supplier who already has a large number of consumers. However, if they have many rivals, you might have more clout. If that’s the case, make an effort to foresee the offers they might make and whether they’ll be valuable.
6. Present oneself as a desirable client.
A powerful negotiation tactic is finding common ground. Understanding your supplier’s perspective can help you determine what you can provide to achieve a better deal; if it also benefits your company, all the better.
Do you have the cash flow or the ability to make large purchases quickly? There are a variety of criteria that could make your business popular, but as you might anticipate, clients that pay on time or make large purchases at once are typically very sought-after.
Use your investigation to identify more areas your supplier might desire, which could lead to concessions in additional areas.
7. Treat the connection with respect
Do not allow your company to lapse into unethical behaviors after you begin a new supplier relationship, such as poor communication or late payments. Don’t put another business through the same struggles as you have with unpaid debt because you likely have firsthand experience with the problems it causes and the time and effort it takes to collect it.
Suppliers might be more adaptable than you anticipate, just as you’d prefer to keep a customer than lose one. If the current arrangement becomes unworkable, it is best to be upfront about it; but, it need not spell the end of your partnership.
If you can propose a practical alternative, like an instalment plan that works for both of you, there may be room to renegotiate or find a short-term workaround. Most likely, your suppliers want to do everything in their power to keep you as a client.
In the end, it will pay off if you were considerate during your discussions and made an effort to invest in the relationship. This good will is just as important to your deal as any other component.
Course Manual 10: Contracting New Suppliers
Strategies for contract negotiations
An effective outcome depends greatly on the preparation you put forth before the negotiation starts. Be sure to thoroughly prepare for contract negotiations and establish negotiation goals.
Make sure the individual representing the supplier has the authority to negotiate and decide whether you will require legal representation during the discussions.
Strategies for supplier contract negotiations
There are various ways to negotiate contracts, but if you’ve never done it before you might want to think about using some tried-and-true tactics.
The following techniques are the most popular:
• Rivaling the supplier by promoting your own interests
• Working together to create a business through collaboration
• Giving in to the interests of the provider, such as when the supplier is essential to your company
• Compromise is balancing your interests with those of the provider.
Different approaches to supplier negotiations will work in various situations. You should think over every option extensively before any encounter. To make wise decisions, you must completely comprehend:
• The state of the market today
• The supplier’s commercial stance;
• Your own bargaining goals
Write down your chosen negotiation approach. This will enable you to establish precise objectives, decide where to draw the line, and, if necessary, withdraw from the transaction.
In contract negotiations, use leverage.
Be conscious of any potential leverage you may have while deciding on your bargaining technique. You might improve your negotiating position, for instance, if you can:
• Consolidate orders if you choose a different supplier
• Package products or services to increase the value of a deal
• Afford to hold back or cancel orders
• Help the supplier enter new markets or industries
• Help them reduce their business risk
• Bring new value to them in any other way
Your ability to recognize suitable negotiating tactics and create a clear strategy for communicating with the supplier and promoting your interests in the negotiation will be aided by this information.
For dealing with suppliers, find more negotiation advice.
Naturally, cost is a major consideration in every contract negotiation, but keep in mind that there are other aspects to take into account. Not always is the lowest option the best option.
Frequently, the supplier’s dependability and consistency are just as crucial as the price. Find out how to haggle over a supplier’s price.
In every negotiation, try to achieve a win-win outcome. The chances of a durable and fruitful collaboration are significantly increased when both parties stand to gain from the arrangement. Learn how to create solid relationships with your suppliers.
Service level agreements with suppliers
Service level agreements (SLAs) are contracts or agreements with suppliers that outline the kind of service they must offer and the standard at which it must be provided. They also outline the duties and obligations that you and the supplier agreed upon.
SLAs are contractual commitments that are frequently included in a binding contract. They may be expressed in the agreement as a single clause, many clauses, or a whole section. SLAs are applicable to any supplier agreement when a service is provided to you.
Supply chain service level agreements
All facets of the provider’s service should be fully described in the supplier service level agreement. The SLA will usually outline:
• The services that will be rendered
• The minimum and maximum levels of service
• The parameters related to the performance and service of the supplier
• The delivery schedule
• Obligations of the service provider and the client
• Provisions for adhering to laws and regulations
• Tools for service reporting and monitoring
• Payment policies
• Dispute resolution procedures
• Potential corrective measures
• Clauses relating to confidentiality and non-disclosure
• Termination circumstances
SLAs typically offer compensation in the form of service charge rebates if vendors don’t provide the agreed-upon levels of service.
Guidelines for service level agreements
It usually takes a lot of time and effort to establish a SLA. Be thorough in your research, discussions, and attempts to reach an agreement with your provider. The best way for a SLA to function is for both sides to jointly commit, therefore make an effort to come to an agreement.
Your SLA needs to be SMART—specific, measurable, achievable, and time-bound. Avoid SLA loopholes and confusing language by being specific about everything that counts in the service.
The most important aspects of the deal can be highlighted in a SLA so that the harshest penalties can be applied to them. Work up all the “what if” possibilities, and don’t forget to include a clause that enables you to frequently evaluate the performance of your providers.
You might occasionally have to accept a supplier’s standard SLA. For instance, it’s unlikely that you’ll be able to ask your telecom provider for a customized SLA. You might need to find different suppliers or develop backup plans if the SLA does not ensure the level of service you seek.
How to handle problems and uncertainty in supply contracts
Here are some practical advice on how to handle and hopefully resolve any supply problems:
Strategy
It is crucial to think about an internal strategy for addressing and resolving supply challenges or uncertainties. Most crucial, avoid taking any irrational actions that can make the issue worse. To achieve this, it may be necessary to engage in negotiation, communication, and cooperative problem-solving.
For instance, if a supplier alerts a client to potential supply issues, the customer may decide to make orders for more goods and pay in full up front, or it may change its commitments about order submission deadlines.
Be sensible
Generally speaking, parties to contracts are presumed to conduct properly and interact with one another honestly and fairly. Both suppliers and customers should make an effort to keep lines of communication open and transparent. In order for there to be a successful and lasting supplier-customer relationship, both parties must be able to communicate honestly and collaborate to come up with fair solutions.
Obligations of good faith
In many contracts, the parties’ “good faith” conduct is also implied. The idea of “good faith” goes beyond the idea of reasonableness and denotes the expectation that the parties will cooperate in order to accomplish the business goals that the contract seeks to cover.
It also suggests that one party won’t try to behave in its own business interests in order to gain an unfair advantage over the other side. This is especially significant for contracts when there are unknowns or supply issues. ‘Good faith’ requirements may be clearly stated in some contracts. Both suppliers and customers should be aware of these requirements because they can be highly onerous.
Negotiate
One of the most crucial business techniques, and even more so for building long-term relationships between parties, is negotiation. Successful supply agreements call for parties to comprehend one another’s commercial stances and cooperate cordially to find solutions when issues arise.
Communication is key
The parties should agree that if any party has any issues fulfilling its commitments, it will promptly notify the other party and keep it informed of the situation as well as the anticipated timelines and solutions.
Collaborate to fix unforeseen problems
Most essential, parties should always cooperate to find solutions to problems. This typically entails both parties taking a pragmatic stance, being conscious of their “pinch spots,” as well as the places where they can be more flexible.
Possible forecasting obligations to be implemented
Many contracts include forecasting as a tool to help both parties. Once accepted, this gives the customer confirmation that a certain number of orders will be filled by the supplier, who will then have guaranteed orders and, thus, guaranteed revenue. Annual consideration of this could help both parties in the event of future supply-related uncertainty.
Course Manual 11: Competitive Advantage
Three ways that procurement fosters a competitive edge
Your company stands out thanks to competitive advantages. These benefits are the things your company excels at more than any other. Often, over time, and with the assistance of several business areas, competitive advantages are developed. An empowered procurement organization works collaboratively with many business contact points. Therefore, procurement can be crucial in developing competitive advantages that customers value.
What specific ways does procurement offer a competitive advantage? When your procurement operation has the capacity to do all of the above at once, magic happens.
1. Control total cost
2. Get value for money
3. Leverage supplier innovation
That’s the stuff competitive advantages are made of.
Total cost management
Examining the big picture is key to controlling total expenditures. A common problem in company is cutting costs in one area only to see them soar in another.
Many have observed the detrimental effects of not taking into account total expenditures across all connected activities at some organizations. Items were purchased in quantity at a “cheap price,” without accounting for the costs of storage, transportation, and destruction. Shareholder value was destroyed by the unneeded costs. These organizations were unable to save themselves millions of dollars and so recover its value by considering ALL business activities, risks, and supplier innovation.
Value for Money
Finding the ideal ratio between quality and price is the definition of getting value for your money. In traditional, clerical procurement processes, only cost is important. However, obtaining a low price at the expense of quality might be quite costly. For instance, picture a factory cutting costs on a component only to discover that poor quality necessitates a production halt. Oops! The “saving” has been abruptly replaced with additional expenses and a reputational risk to manage.
Supplier Innovation
You need to use supplier innovation because you can’t accomplish it by yourself. Only the quality of your vendors matters. Your ability to compete in the market is aided by their abilities, inventiveness, and originality. Your business will be more successful the more adept you become at leveraging the opportunities presented by the supplier market.
Even major corporations, frequently underuse the potential of supply marketplaces. One business prioritized internal operations over communicating with suppliers. They got better value for our money when they broke the mold and started business-focused communication with suppliers. They also had access to services that increased productivity and, consequently, competitiveness. This was accomplished with comparatively few resources, which is something that any corporation might have done.
How to gain a competitive edge through your procurement process
Most procurement experts would file the procurement procedure book in the circular file cabinet and adopt a more “hand-to-mouth” approach during difficult times, but your procurement process can not only help you through difficult times but also give your firm a competitive advantage.
The ability of your business to offer goods and services that are superior to those of your rivals and/or offer greater value is known as competitive advantage. Typically, your business’s competitive advantages are built over time with input from numerous departments.
An organization can choose the best portfolio of suppliers and match those suppliers with the organization’s objective by using an efficient procurement process. This can be accomplished through agreeable terms and cross-functional excellence, which stimulates and incubates collaboration.
A quick but real cost improvement can be produced through an efficient and effective procurement procedure, which can also improve the supply chain’s agility.
Therefore, a well-defined procurement process can give your company a competitive edge by decreasing costs throughout the value chain, enhancing efficiency in the delivery of high-quality goods and services, promoting product innovation, lowering supplier risk, and boosting supply chain resilience.
Based on the following factors, procurement departments should assess if their organization’s present procurement procedures support its competitive advantage:
Reduced total cost across the value chain
Delivering value is a procurement organization’s main objective. By acquiring materials and services at the lowest possible cost, a successful procurement department reduces operational costs.
Additionally, with the right procurement procedures in place, a company might benefit from discounts and/or warranties that are frequently overlooked or improperly handled.
To effectively manage expenditures, though, you must be able to monitor what your company is spending. The goal is minimizing shadowy purchasing techniques. An efficient procurement process encourages complete transparency into an organization’s spending for all purchasing activities, which enables you to save procurement expenses, strengthen ties with stakeholders, and monitor purchasing trends to generate long-term financial gains.
Cost management enables you to increase the cost competitiveness of your items in the market.
Greater Efficiency
The primary goal of all sourcing and procurement activities is to achieve a competitive advantage by making the best possible use of the external market and suppliers.
Every good or service sourced should advance competitive positioning, whether directly or indirectly. When a business has an efficient procurement process, procurement may streamline operations, encourage teamwork, and identify high- and low-performing suppliers.
An organization can benefit from economies of scale thanks to an effective procurement process, which lowers costs and boosts production, giving it a competitive edge. Your procurement team will be able to easily ascertain the capabilities, interests, competitiveness, and financial strength of your suppliers thanks to the efficiency of your supplier relationships. This will enable you to optimize your supplier base by eliminating underperformers and working with suppliers who can strengthen the competitive advantage of your company.
Embrace innovation
In addition to having the skills essential to provide cost reductions, meet social responsibility goals, manage supplier relationships, and manage risk, procurement professionals are today expected to be inventive in order to obtain a competitive advantage.
Because design and specification determine between 70 and 80 percent of a product or service’s cost, procurement can play a role in innovation throughout the product development stage. This has a direct bearing on the organization’s ability to compete in the market.
Additionally, innovation in the procurement division can enhance the exchange of complex data and help the negotiating stage through online auctions and bidding systems or online catalogs, which let you verify product availability, place and track orders, and make payments.
These tools are more essential than ever for acquiring products and services effectively and cutting costs from the process.
Reduce supplier risk
This is important. Events related to supplier risk can occur in four categories: financial, operational, compliance, and strategy.
Risk avoidance, risk reduction, and risk sharing are all parts of risk mitigation, which should be ongoing and ever-evolving in order to manage all the risks connected to the companies’ past, present, and future actions.
An efficient procurement procedure must include a long-term approach to identifying, evaluating, and resolving supplier concerns. The outcomes can have an influence on an organization’s capacity to compete when a lack of readiness in risk management does not match the pattern of a company’s possible vulnerabilities.
To take into consideration their organizational weaknesses and make sure that remedies—or at the very least temporary solutions—are in place, procurement organizations must analyze their current process.
Encourage resilience
A procurement process should cover contingency plans and solutions for unforeseen circumstances including economic turbulence, labor market volatility, and natural calamities.
Due to the problems of 2020, procurement departments have had to modify their methods in order to control supply disruptions and cash flow while continuing to serve their clients.
In this new environment, procurement must shift from just-in-time to just-in-case strategic thinking and build process resilience to deal with these unforeseen circumstances. According to Christopher and Holweg, supply chain resilience enables a company to create a partner network that is resilient enough to adjust to unanticipated interruptions while keeping control and, if possible, continuing through the disruption more favorably and obtaining a competitive advantage.
Long-term success will be significantly improved by a resilient and strong procurement process that can take into account potential future, and occasionally disastrous, changes that may occur when supplier chains and procurement activities are redefined.
Course Manual 12: Review Supplier Performance
Program for IT Supplier Performance Management: Objectives and Plan
The supplier performance management program must have clearly defined objectives. These goals must to be connected to the overall business plan and the organization’s objectives. A supplier performance management program will, at best, be useless and could waste resources if it is not in line with the company’s objectives and strategy. The program’s objectives ought to be related to the company’s overall spending and, as a result, ought to represent both its financial priorities and strategic objectives. This implies that the program should pay more attention to and be more focused on areas where the corporation invests more money or has a bigger strategic emphasis.
The program’s objectives should not only be consistent with the broader business plan, but also be specific and clear. They must to have a schedule, be precisely stated, be measurable, and be detailed. The goals and important metrics that determine success inside the organization should be clearly stated, and they should also be in writing. The program should identify the important individuals who will be involved and should outline the resources needed. These actions will be necessary to win top management’s cooperation and support. Prior to implementing the program with other suppliers, it could be a good idea to test it out with a smaller group of suppliers to get feedback, make necessary improvements, and measure the program’s success.
Focus on Key Performance Indicators as Metrics (KPIs)
The firm’s goals, strategy, and the program’s objectives for supplier performance management will all have a direct bearing on the areas that the company chooses to monitor and manage as well as the standards that are applied. There are many different ways to gauge a supplier’s performance. Picking the ones that are most crucial to the corporation is crucial. Financial health (risk of bankruptcy, liquidity, sales, etc.), operational performance (quality, lead times, customer services, etc.), contract compliance, business processes (defect prevention, inspections, etc.), and overall cost are typical areas that businesses choose to measure. There are additional metrics that a specific company may value. Key Performance Indicators should be used to define these measurements (KPIs).
Pay Special Attention to High-Value and Strategic Suppliers
The kind of suppliers a company uses should also be taken into consideration when choosing an evaluation approach. Since these suppliers provide the most risks to the supplier performance management program, it is crucial for corporate personnel to concentrate on the higher value and more strategic suppliers. Including low dollar value, one-time business, or non-strategic suppliers in this kind of program is frequently not financially viable. Some common characteristics will become clear by assembling these top vendors and looking at the company’s connections with them. These relationship characteristics can be utilized to create the measurement domains and metrics.
Using Suppliers to Achieve the Best Results
Working with the suppliers is crucial when creating these KPIs and areas of focus. Some of the finest organizations at evaluating supplier performance regularly contact with their suppliers, engage in ongoing interaction with them, and employ measurements that are mutually acceptable. This fosters greater collaboration with suppliers and guarantees that they are aware of what is expected of them. Additionally, they have the ability to create business plans and take action to achieve the goals and objectives set for them. The providers are likewise keenly aware of whether their performance has been good or bad.
Method of Evaluation
The next step is to decide how a company will evaluate the supplier’s performance after deciding what it will be evaluating. There are numerous ways to accomplish this; some require more money, time, and resources than others. Personnel from the organization can choose the best method or set of methods to utilize by measuring the degree of risk and the anticipated reward of a way of evaluation. Companies frequently employ the following techniques to assess and gauge the performance of their suppliers:
• Paper supplier questionnaires
• Web based supplier questionnaires
• Organizing existing data
• Internal questionnaires
• Requiring external certifications
• Developing own certifications
• Third party reviews
• Phone call with a supplier
• Independent ratings
• Contacts with other supplier customers
Additionally, businesses must select how and when to apply these techniques. It is crucial to use some of the least expensive techniques frequently to get up-to-date risk assessments and scorecards. If done properly, this will also assist the business in staying informed of significant developments prior to them becoming a problem. Site visits are one of the more expensive techniques that should be used less frequently. Site inspections, however, are a useful tool and make it simpler to appropriately analyze the supplier’s performance for significant, high-risk providers. Additional evaluations and certifications might provide a business more confidence in the operations and procedures of a supplier.
Framework for Evaluation
The real supplier assessment must be designed so that it generates information and data that can be used to make decisions in order to be effective. If the company’s completed supplier assessments provide vague or ambiguous information, management will not be able to use this knowledge to make educated decisions, and the effort will have been effectively wasted. This means that open-ended inquiries or inquiries that are very protracted or verbose are frequently not the best strategy for these evaluations. The questions ought to be unambiguous, succinct, and intended to elicit comparable and analytical responses. For the questions to yield valid results, they must also be sufficiently narrowly focused on the thing they are meant to measure.
Sometimes, supplier evaluations are too limited and don’t reach all the necessary internal or external parties. It’s critical to consider all individuals who came into contact with a supplier or a supplier’s products when conducting supplier assessments based on internal input. This shouldn’t be restricted to those who might have motivations to only offer the supplier positive feedback. The majority of internal evaluations involve personnel from the company’s engineering, receiving, purchasing, and other departments. The evaluations may make varied attempts to get information from these individuals, but overall, the framework and the KPIs that serve as the foundation of the assessment should not change. It will be simpler to compare data across time and between vendors as a result.
The supplier assessment form should be simple to complete. Suppliers may be less likely to return the evaluation if the questions are unclear or the questionnaire/survey is lengthy and challenging to complete. The inquiries shouldn’t be challenging to comprehend for either the supplier or an internal individual. They shouldn’t use excessive language or complicated purchase jargon. They ought to be lucid and succinct. Instructions on how to complete and submit the survey should also be included in the questionnaire. It ought to have a completion date as well. If software or automation is utilized for this procedure, these steps may be simpler.
Analyzing Assessment Results
The next step is to review the performance data after a system for routinely gathering it from vendors has been established. The format in which the data is presented should ideally facilitate comparison and analysis. Additionally, the data ought to be presented in a scoreable and quantifiable way. A supplier scorecard is commonly used by businesses for this. Additionally, information from various assessments, including site inspections, internal surveys, and external surveys, should be included in the analysis. It is nearly impossible to gather, organize, and review data from assessments on a wide scale without automation or software because the majority of large firms have a high number of strategic suppliers and amounts of data.
The two things to look for when analyzing supplier performance data are significant changes in the performance measures and broad patterns, in addition to the obvious. A business can predict where the performance data will be in the future by analyzing trends and then take appropriate action. Performance declines and downward patterns may indicate a problem. Additionally, a sudden shift in performance indicators could indicate an impending issue. There might be another explanation, though. In this situation, it makes sense to ask the provider for further information and to delve further to identify the problem’s root cause. It could be a one-time anomaly or something more serious.
Proactively tracking supplier performance can make sure that policy exceptions are tracked and persons and resources are allocated to rapidly fix the issue. Employees of the organization can receive real-time information about changes in supplier performance through alerts and notifications. It is advantageous to have a system that can output the assessment/scorecard data in a report or another format so that team members can easily access and examine it.
Taking Charge
It is crucial to act swiftly when there is a sudden decline in supplier performance or a declining trend. Rapid action can lessen the likelihood of catastrophe, severe loss, and gives the business the ability to take precautions against negative outcomes. Communicating with the supplier, carrying out additional analyses, creating an improvement plan, or looking for a different provider are some possible actions. Numerous factors may influence the decisions made. The supplier’s historical performance, level of present performance, strategic significance, potential harm, and overall risk are some of these.
Making contact with the provider to learn what went wrong and why is one of the first things to do. The supplier should be given the performance assessment results, which can serve as a starting point for conversations. Something beyond the supplier’s control may have contributed to the subpar performance. Process, staff, a supplier, or whatever else could have been at fault. Employees can try to work with the supplier to make changes to bring the supplier’s performance back into conformity with the contract or with corporate policy by communicating with the supplier to identify the root of the issue. It could be a red flag if the vendor cannot adequately explain or comprehend why the issue happened.
Creating a supplier improvement plan is the next step after determining the root causes of a problem or combination of problems. The strategy should include both corporate and supplier staff, be specific to the issue, and include a deadline for solving the issue or bringing the performance into compliance. This procedure ought to be cooperative and geared toward enhancing the entire supply chain. Even if a supplier’s performance is satisfactory, the business may choose to spend time and money on supplier development and performance enhancement.
The business may decide to end all relations with the provider if the issue is too serious, cannot be resolved quickly, or poses an unacceptable risk. This means that the business must carefully identify a different supply source and, if at all feasible, lessen its reliance on the disputed supplier.
Conclusion
It is obvious that gathering supplier data is only one aspect of supplier performance management. It is a thorough method of managing a company’s supplier base and represents the company’s strategy. To increase overall profitability, it aims to detect and reduce risks. Performance evaluations, supplier scorecards, recurrent reviews of supplier data, and supplier development are frequently included. It also involves a buying strategy that is focused on enhancing the performance of the supply base. Software, systems, processes, and people are also involved in supplier performance management. It takes understanding of an organization’s objectives, operational procedures, organizational structure, and supply chain to manage suppliers effectively. When done correctly, it can provide a corporation with significant financial advantages.
Review your suppliers’ performance
Reviewing a supplier’s performance in relation to agreed-upon key performance indicators (KPIs) and service level agreements is the purpose of supplier performance reviews (SLA).
The reviews are a crucial part of supplier performance management, which aims to gauge and keep track of suppliers’ performance to:
• Reduce costs
• Mitigate risks
• Drive continuous improvement
If your company outsources a significant amount of work, it is crucial to routinely assess your suppliers’ performance.
Benefits of supplier performance evaluations
You’ll benefit from routine supplier performance assessments if you:
• Monitor compliance with agreed KPIs and SLAs
• Identify performance gaps and areas where they fail to meet expectations
• Pre-empt issues that lead to underperformance
• Agree on actions needed to deal with performance failures
• Benchmark the suppliers’ performance against others in the industry
• Motivate supplier to improve performance
• Prevent complacency, especially in long-term arrangements
• Hold suppliers accountable for any failures or breach of agreed terms
If you have a SLA, performance evaluations might be able to help you evaluate the supplier/business relationship as objectively as feasible. SLAs with suppliers are available.
How may supplier performance be evaluated?
You can develop review forms for various services or providers using supplier management software, or you can design a form specifically for your company.
The following categories for suppliers’ evaluation criteria are typical:
• Performance, for example, efficiency (KPIs) and delivery (SLAs) of services under a contract
• Situations, such as occurrences that have harmed your business billing, such as timely and accurate invoicing, order processing, etc.
• Quality factors include supplier responsiveness, client care, supplier expertise, etc.
You can use the following sources of information to evaluate various facets of the supplier’s performance:
• Scorecards for vendors
• Customer opinions
• Client feedback forms, incident reports, and action plans
The service level agreement will typically offer compensation, frequently in the form of rebates on monthly service fees, if you discover after the review process that your suppliers are underperforming.
Periodicity of supplier performance evaluations
A performance review ought to be done every quarter, every two years, or every year. The frequency should be determined by the services provided by the supplier and any potential dangers to your company.
Usually three months following the start of the services, the first performance review occurs. It’s important to keep track of the supplier’s performance prior to the assessment and to record any failures or events that occur. You might be able to develop an action plan using this for the ongoing performance reviews.
A performance review is frequently conducted about six months before a supplier contract is renewed. Before approving the new contract, this gives the opportunity to find performance gaps and work out problems with the provider.
Any company that depends on suppliers to provide their goods or services must engage in supplier quality management (SQM). It entails managing, watching for, and reacting to shifts in the supplier’s capacity to meet the customer’s needs on schedule and in accordance with the specified level of quality.
Key practices for managing supplier quality
Several tactics can be used to keep an eye on and enhance quality along your supply chain. You can, for instance:
• Calculate the price of quality by learning how much it costs to produce a high-quality product. Then consider the costs associated with poor quality, such as scrap, rework, sorting and processing, warranty and recall expenses.
• Introduce a cost recovery mechanism. By agreeing to a cost recovery method, the supplier chain may be held more accountable. It might enable you to hold a supplier accountable for the expense of poor quality and motivate them to dig into and promptly resolve issues causing poor quality.
• Establish a process to audit your supplier and check for non-conformances in production, quality, service provision, compliance, etc. Audits can point out areas that need improvement and assist you in deciding on corrective measures, reaction and resolution processes, and other goals.
• Introduce supplier scorecards; these standardized scorecards may allow you to evaluate suppliers based on their performance and compare them to one another. Scorecards can track risks, non-conformance, and key performance indicators (KPIs) for suppliers. They can assist you in identifying quality improvement opportunities, tracking quality failures over time, and agreeing on corrective actions to reduce quality risks moving forward.
• Integrate IT processes. An integrated enterprise solution can facilitate communication, cooperation, and quality control throughout the supply chain from procurement to delivery instead of using separate financial, quality, and operational systems.
How to evaluate the performance of a supplier
Keeping track of important indicators and KPIs, such as the percentage of:
• Returned merchandise
• Timely and full delivery of the ordered goods
• Items that adhere to rules or quality requirements
• New items that hit timing, volume, and quality goals were released onto the market
Order fill rate, lead-time variance, received vs. ordered units, ordered price vs. invoiced price, correctness of advanced shipment notifications, etc. are examples of additional supplier performance measures.
Supplier certification and quality control
A quality-related accreditation, such the ISO certification, may be held by some vendors. This is a sign of exceptional quality that is acknowledged throughout the world, indicating that the supplier:
• Complies with verified standards
• Possesses a reliable quality management system
Selecting providers with quality certifications gives you peace of mind that they have the necessary procedures in place to deliver you dependable, consistent service. Learn more about selecting the best suppliers and quality management criteria.
The significance of supplier quality control
Managing the quality of your suppliers can have a big impact on your company. It can raise the caliber of your products, increase your revenue, and improve the standing of your company. Poor supplier quality, on the other side, might result in lost sales, pricey recalls, fines for non-conformance, or legal action.
Workshop Exercises
Sourcing Strategies Exercises
01. Sourcing Plan : Explain in your own words how this process will directly impact upon your department?
02. Building a Procurement Team : Explain in your own words how this process will directly impact upon your department?
03. Spend Analysis Part 1: Explain in your own words how this process will directly impact upon your department?
04. Spend Analysis Part 2: Explain in your own words how this process will directly impact upon your department?
05. Research Supplier Market : Explain in your own words how this process will directly impact upon your department?
06. Suitable Suppliers : Explain in your own words how this process will directly impact upon your department?
07. Calculating Costs : Explain in your own words how this process will directly impact upon your department?
08. Calculating Risks : Explain in your own words how this process will directly impact upon your department?
09. Negotiate with Chosen Suppliers : Explain in your own words how this process will directly impact upon your department?
10. Contracting New Suppliers : Explain in your own words how this process will directly impact upon your department?
11. Competitive Advantage : Explain in your own words how this process will directly impact upon your department?
12. Review Supplier Performance : Explain in your own words how this process will directly impact upon your department?
SWOT & MOST Analysis Exercises
01. Undertake a detailed SWOT Analysis in order to identify your department’s internal strengths and weaknesses and external opportunities and threats in relation to each of the 12 Sourcing Strategies processes featured above. Undertake this task together with your department’s stakeholders in order to encourage collaborative evaluation.
02. Develop a detailed MOST Analysis in order to establish your department’s: Mission; Objectives; Strategies and Tasks in relation to Sourcing Strategies. Undertake this task together with all of your department’s stakeholders in order to encourage collaborative evaluation.
Project Studies
Project Study (Part 1) – Customer Service
The Head of this Department is to provide a detailed report relating to the Sourcing Strategies process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Sourcing Plan
02. Building a Procurement Team
03. Spend Analysis Part 1
04. Spend Analysis Part 2
05. Research Supplier Market
06. Suitable Suppliers
07. Calculating Costs
08. Calculating Risks
09. Negotiate with Chosen Suppliers
10. Contracting New Suppliers
11. Competitive Advantage
12. Review Supplier Performance
Please include the results of the initial evaluation and assessment.
Project Study (Part 2) – E-Business
The Head of this Department is to provide a detailed report relating to the Sourcing Strategies process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Sourcing Plan
02. Building a Procurement Team
03. Spend Analysis Part 1
04. Spend Analysis Part 2
05. Research Supplier Market
06. Suitable Suppliers
07. Calculating Costs
08. Calculating Risks
09. Negotiate with Chosen Suppliers
10. Contracting New Suppliers
11. Competitive Advantage
12. Review Supplier Performance
Please include the results of the initial evaluation and assessment.
Project Study (Part 3) – Finance
The Head of this Department is to provide a detailed report relating to the Sourcing Strategies process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Sourcing Plan
02. Building a Procurement Team
03. Spend Analysis Part 1
04. Spend Analysis Part 2
05. Research Supplier Market
06. Suitable Suppliers
07. Calculating Costs
08. Calculating Risks
09. Negotiate with Chosen Suppliers
10. Contracting New Suppliers
11. Competitive Advantage
12. Review Supplier Performance
Please include the results of the initial evaluation and assessment.
Project Study (Part 4) – Globalization
The Head of this Department is to provide a detailed report relating to the Sourcing Strategies process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Sourcing Plan
02. Building a Procurement Team
03. Spend Analysis Part 1
04. Spend Analysis Part 2
05. Research Supplier Market
06. Suitable Suppliers
07. Calculating Costs
08. Calculating Risks
09. Negotiate with Chosen Suppliers
10. Contracting New Suppliers
11. Competitive Advantage
12. Review Supplier Performance
Please include the results of the initial evaluation and assessment.
Project Study (Part 5) – Human Resources
The Head of this Department is to provide a detailed report relating to the Sourcing Strategies process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Sourcing Plan
02. Building a Procurement Team
03. Spend Analysis Part 1
04. Spend Analysis Part 2
05. Research Supplier Market
06. Suitable Suppliers
07. Calculating Costs
08. Calculating Risks
09. Negotiate with Chosen Suppliers
10. Contracting New Suppliers
11. Competitive Advantage
12. Review Supplier Performance
Please include the results of the initial evaluation and assessment.
Project Study (Part 6) – Information Technology
The Head of this Department is to provide a detailed report relating to the Sourcing Strategies process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Sourcing Plan
02. Building a Procurement Team
03. Spend Analysis Part 1
04. Spend Analysis Part 2
05. Research Supplier Market
06. Suitable Suppliers
07. Calculating Costs
08. Calculating Risks
09. Negotiate with Chosen Suppliers
10. Contracting New Suppliers
11. Competitive Advantage
12. Review Supplier Performance
Please include the results of the initial evaluation and assessment.
Project Study (Part 7) – Legal
The Head of this Department is to provide a detailed report relating to the Sourcing Strategies process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Sourcing Plan
02. Building a Procurement Team
03. Spend Analysis Part 1
04. Spend Analysis Part 2
05. Research Supplier Market
06. Suitable Suppliers
07. Calculating Costs
08. Calculating Risks
09. Negotiate with Chosen Suppliers
10. Contracting New Suppliers
11. Competitive Advantage
12. Review Supplier Performance
Please include the results of the initial evaluation and assessment.
Project Study (Part 8) – Management
The Head of this Department is to provide a detailed report relating to the Sourcing Strategies process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Sourcing Plan
02. Building a Procurement Team
03. Spend Analysis Part 1
04. Spend Analysis Part 2
05. Research Supplier Market
06. Suitable Suppliers
07. Calculating Costs
08. Calculating Risks
09. Negotiate with Chosen Suppliers
10. Contracting New Suppliers
11. Competitive Advantage
12. Review Supplier Performance
Please include the results of the initial evaluation and assessment.
Project Study (Part 9) – Marketing
The Head of this Department is to provide a detailed report relating to the Sourcing Strategies process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Sourcing Plan
02. Building a Procurement Team
03. Spend Analysis Part 1
04. Spend Analysis Part 2
05. Research Supplier Market
06. Suitable Suppliers
07. Calculating Costs
08. Calculating Risks
09. Negotiate with Chosen Suppliers
10. Contracting New Suppliers
11. Competitive Advantage
12. Review Supplier Performance
Please include the results of the initial evaluation and assessment.
Project Study (Part 10) – Production
The Head of this Department is to provide a detailed report relating to the Sourcing Strategies process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Sourcing Plan
02. Building a Procurement Team
03. Spend Analysis Part 1
04. Spend Analysis Part 2
05. Research Supplier Market
06. Suitable Suppliers
07. Calculating Costs
08. Calculating Risks
09. Negotiate with Chosen Suppliers
10. Contracting New Suppliers
11. Competitive Advantage
12. Review Supplier Performance
Please include the results of the initial evaluation and assessment.
Project Study (Part 11) – Logistics
The Head of this Department is to provide a detailed report relating to the Sourcing Strategies process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Sourcing Plan
02. Building a Procurement Team
03. Spend Analysis Part 1
04. Spend Analysis Part 2
05. Research Supplier Market
06. Suitable Suppliers
07. Calculating Costs
08. Calculating Risks
09. Negotiate with Chosen Suppliers
10. Contracting New Suppliers
11. Competitive Advantage
12. Review Supplier Performance
Please include the results of the initial evaluation and assessment.
Project Study (Part 12) – Education
The Head of this Department is to provide a detailed report relating to the Sourcing Strategies process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Sourcing Plan
02. Building a Procurement Team
03. Spend Analysis Part 1
04. Spend Analysis Part 2
05. Research Supplier Market
06. Suitable Suppliers
07. Calculating Costs
08. Calculating Risks
09. Negotiate with Chosen Suppliers
10. Contracting New Suppliers
11. Competitive Advantage
12. Review Supplier Performance
Please include the results of the initial evaluation and assessment.
Program Benefits
Information Technology
- Agile IT processes
- Improved value delivery
- Decreased defects
- Continuous improvement
- Modernized infrastructure
- Re-tooled staff
- Increased morale
- IT Business partnership
- Meaningful metrics
- Effective sourcing
Management
- Decreased costs
- Aligned strategies
- Servant leadership
- Clarified priorities
- Improved effectiveness
- Improved transparency
- Reduced risk
- Measurable results
- Satisfied customers
- Vendor partnerships
Human Resources
- Empowered teams
- Servant leaders
- Re-tooled staff
- Improved teamwork
- Enhanced collaboration
- Improved performance
- Reduced turnover
- Improved loyalty
- Leadership development
- Employee development
Client Telephone Conference (CTC)
If you have any questions or if you would like to arrange a Client Telephone Conference (CTC) to discuss this particular Unique Consulting Service Proposition (UCSP) in more detail, please CLICK HERE.