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Strategic Sourcing Methodologies, Tools, Processes and Outcomes E&I’s Strategic Sourcing Process PowerPoint Presentation
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Strategic Sourcing Methodologies, Tools, Processes and Outcomes E&I’s Strategic Sourcing Process

Strategic Sourcing Methodologies, Tools, Processes and Outcomes E&I’s Strategic Sourcing Process

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Strategic Sourcing Methodologies, Tools, Processes and Outcomes E&I’s Strategic Sourcing Process

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  1. Fernando I. Prieto & Vince Patriarco April 21, 2009 Strategic SourcingMethodologies, Tools, Processes and OutcomesE&I’s Strategic Sourcing Process

  2. What Will We Cover Today? • Introduction • Methodology • Higher Education Sourcing Challenges • E&I Sourcing Program – An In-Depth Look • Spend Analytics • Building Sourcing Teams • Strategy Development • Benchmarking • Contract Administration • Questions

  3. BUYER MENTALITY Procedural Spontaneous Immediate Narrow Viewed Need driven Depletes Assets Transactional SUPPLY CHAIN MGMT MENTALITY Methodical Organized Time Sensitive Collaborative & Altruistic Data Driven Managed Assets Strategic Introduction There are key differences between buying and strategically sourcing.

  4. Strategic Sourcing Methodology Understanding the importance of a methodology is essential. All Strategic Sourcing Methodologies: • Most importantly a Strategic Tool*** • A written 6 to 8 step framework for sourcing initiatives • Is a set of guidelines for skilled procurement professionals • Becomes the high level project plan for the initiative • Lists at a minimum the most important analyses required • Enables organizations to achieve procurement led cost reduction savings

  5. Admin & SRM Develop Strategy Assess Opportunity Execute Solicitation Engage Suppliers MEMBERSHIP: • Analyze member demand drivers • Profile member spend & related costs • Gauge membership interest and management buy-in EXTERNAL: • Evaluate Industry & supplier landscape • Benchmark & assess competing contracts • Establish desired outcomes • Draft action plan to reach outcome • Select target industry sector • Select target suppliers • Receive management approval & buy-in • Communicate strategies to membership MEMBERSHIP: • Create & publish contract docs • Collaborate with member services SUPPLIERS: • Establish supplier partner relationship • Conduct monthly operational update meetings • Hold quarterly supplier meetings • Measure contract performance • Leverage member relationships w/suppliers • Conduct pre-sell supplier meetings • Gauge supplier willingness • Determine solicitation approach • Communicate plans internally • Update membership communications Pre-Solicitation: • Comply with state bid requirements • Determine evaluation criteria • Draft solicitation & release publicly Post-Solicitation: • Evaluate supplier solicitation responses • Perform benchmark comparisons • Negotiate & Finalize Award E&I Strategic Sourcing Methodology Our E&I strategic sourcing methodology continues to evolve and correspond with our unique cooperative purchasing contract business. • Assemble member volunteers, committee • Engage functional experts • Ensure cross-location views • Establish roles & team scope • Organizational and stakeholder buy-in Build Sourcing Team

  6. Assessment Stages Data Analysis Developing Strategy Supplier Screening Sourcing Events Negotiating Contract Implementation & Administration Audience Survey What areas of sourcing methodology do procurement folks in Higher Ed find mostchallenging?

  7. Build Sourcing Team Admin & SRM Execute Solicitation Develop Strategy Assess Opportunity Engage Suppliers The E&I Sourcing Program – Let’s take a look • Highlight key steps in the methodology • Discuss key work done in the areas of • Approaches Utilized • Examples of Capabilities E&I relies heavily on collaborative and exhaustive approaches to formulate its overall sourcing program

  8. Assess Opportunity Spend Analytics

  9. Assess Opportunity E&I Spend Cube Advantages Over Prior Survey Process The spend cube approach is a more direct approach rather than the survey approach taken with the 2006 spend survey. Key Approach Differences This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  10. Spend Cube Data Aggregation Assess Opportunity Database Spend & Trend Analysis User Surveys External Assessment Spend Reports Supply Mkt Analysis Benchmark Analysis E&I Key Initiatives Spend Cube Background The spend cube is the key methodology proposed for improving visibility of data available to the contracts team. • Expected benefits include: • Insight to member spend data beyond surveys • Source information for potential new contract areas • Better way to benchmark information along with other data aggregation and procedures • Additional data points for better informed sourcing decision making This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  11. Data Sources Output 3 Dimensions of Cube General Ledger Assess Opportunity • Suppliers • From whom members are buying • Cost Center • The departments driving the purchasing • Commodity • The goods or services being purchased Commodity Accounts Payable Paid Invoices Suppliers Cost Center Vendor CRM Data E&I Spend Cube What is a spend cube? The Spend Cube methodology drives the development of our overall member spend profiling activities. This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  12. Assess Opportunity E&I Spend CubeOur Sample Group of School Data Various information sources were tapped by member to submit the requested data. School 6 – P-Card Main: Consolidated Data Parts School 7 - Main: Over 25K All payments provided. Did not include salary payments School 6 - Paid PO's School 5 – P-Card Main: Contract or Non Contract School 1 – Main: Non Contract Separate spend provided for both contracted and non contracted suppliers School 5 - Main P-Card: In some cases p-card spend was provided separate from main spend School 4 - Main School 1 – Main: Contract Paid PO’s: Cases where most spend is largely controlled through purchase orders School 3 - Main Main: Over $25k All spend excluding payees with payments totalling less than $25k School 2 – Main This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  13. Assess Opportunity E&I Spend CubeSample Population - Characteristics Understanding the characteristics of the members participating is important. Institution Geography Enrollment This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  14. Assess Opportunity E&I Spend CubeSpend Data Categorization Standards Spend analysis builds from the amount of taxonomy available to us. Much of it we had to create This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  15. Assess Opportunity E&I Spend CubeTotal Spend Data Collected The data provided by seven schools amounted to approximately $2.3 billion in spend payments. Spend Dollars Collected Participant % of All This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  16. Assess Opportunity E&I Spend Cube Decomposition of Spend Data The $2.3 billion was categorized and filtered to determine a total initial affectable spend of $1.6 billion. This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  17. Assess Opportunity E&I Spend CubeApplying The Data To Our Business Spend gathered was organized at a high level first with 5 key contract product groupings. Affectable Spend by E&I Product Group % Breakdown This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  18. Assess Opportunity E&I Spend Cube Further Understanding Spend Info The percentage each school has in 5 key groupings varies only slightly. This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  19. Assess Opportunity E&I Spend CubePayee Categories for Services Suppliers under Services fall further into 12 payee categories. This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  20. Assess Opportunity E&I Spend CubeSubcategories are further created for analysis Maintenance & Facilities can be further broken down into 20 subcategories. This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  21. Build Sourcing Team Building Sourcing Teams

  22. William Cooper – University of Missouri Lisa S. Deal – University of Florida Mary Dukakis – The Berklee School of Music Donald W. Green – Cal State – Fullerton Ralph Maier – University of Pennsylvania Jack Zencheck – Yeshiva University Gina Arms – Colorado College Tonia E. Lawson– Gulf Coast Community College Kevin Maloney– University of Pittsburgh Valerie Rhodes-Sorrelle– Grand Valley State University Judith C. Smith– University of Michigan Barry Swanson– University of Kansas Build Sourcing Team E&I Builds Sourcing TeamsImportance of Collaboration • Provide proactive leadership in the endorsement and utilization of contracts • Helps cultivate relationships with suppliers, members, and member associations to identify new opportunities • Advocates socially responsible and environmentally friendly purchasing initiatives • Provides counsel and validation for sourcing opportunities STRATEGIC SOURCING COMMITTEE

  23. LIFE SCIENCES STRATEGY TEAM Phil Abruzzi – University of Illinois Kim Andrulonis – Johns Hopkins University Paul Beyer – Johns Hopkins University Jeanine Cahill – Washington University – St. Louis Michael Durica – University of Pittsburgh Lynn Hein – University of Minnesota Tina Lowenthal – California Institute of Technology Kevin Maloney – University of Pittsburgh Anu Mathew – University of Illinois Greg Mosley – Washington University, St. Louis Candace Plog – University of Washington David Staskin – University of Pennsylvania Darryl Sweet – University of California, Office of the President TECHNOLOGY STRATEGY TEAM Amir Dabirian – Cal State Fullerton Donald W. Green – Cal State Fullerton Richard A. Haugerud – University of Nebraska , Lincoln John Louis – University of Kansas Tom Roberts – Cal State, Chancellors Office Barry Swanson – University of Kansas Richard Beynon – University of Pennsylvania FACILITIES STRATEGY TEAM (NEW!) Jack T. Baker – University of Maryland Aurelia Brandenburg – Berea College William Elvey – University of Texas, Dallas Margaret Kinnaman – University of Maryland Brad Larson – University of Oklahoma E. Lander Medlin – APPA William Propst – UCLA James Stirling – University of Maryland Paul Watson – University of Texas, Dallas Build Sourcing Team E&I Builds Sourcing TeamsImportance of Collaboration • Identify and develop current and future contracting opportunities in targeted commodity area • Comprised of members with specific expertise in targeted commodity area

  24. Develop Strategy Strategy Development

  25. Develop Strategy E&I Strategy DevelopmentUsing GPO Evaluation Criteria Our contract team considers some key questions and criteria as we evaluate each area. Evaluation Questions • Is this area suited for a cooperative contract? • Could a contract here compete against our other contracts in this area? • Is the supply based consolidated or fractured? • Will this be more suited for regional or national efforts? • Is this an area school have currently HIGH, MEDIUM, or LOW contract coverage? This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  26. Develop Strategy E&I Strategy DevelopmentLeveraging Other Experts We teamed up with functional experts, in facilities for example, to determine areas of opportunities. This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  27. Execute Solicitation Benchmarking

  28. Understanding where you are, what you have and what it means going forward is critical for decision making. A key area we have added some methodology and procedure is Measurement Measurement Analysis Baseline Development Projected Savings Estimate Actual Savings Achieved Execute Solicitation E&I Solicitation Process Benchmarking

  29. Execute Solicitation E&I Solicitation Process Benchmarking • KEY COMPONENTS OF BENCHMARKING • Keeping it simple • Comparing apples to apples • Maintaining usefulness over time • Ensuring confidentiality • Designing proper metrics • Understanding vendor relationships

  30. Execute Solicitation E&I Solicitation Process Benchmarking Benchmarking contract pricing is essential to our process for creating these unique contracts • Supplier Types • Exact Match - Same Supplier • Same Product – Same Product Different Suppliers • Like Product – Like Product Different Suppliers • Pricing Structures • Discount off List • Item Pricing • Create Market Basket • Combination of Discount off List and Item Pricing • Create Market Basket Calculate Discount off List • Pricing Agreements to use in Comparison • State Contracts (Note some states use member agreements. I.E. – Wisconsin, Colorado, California etc.) • GPO’s • Member Agreements • Public Agreements (Education Discount) • GSA This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  31. Execute Solicitation E&I Solicitation Process Bid & Proposal Evaluation Evaluation of responses is typically a methodical & collaborative process Evaluation Approaches COST PER QUALITY POINT SYSTEM Pre-Solicitation • Evaluation criteria created before hand • Possible point values assigned Post-Solicitation • Evaluate responses to criteria • Follow ups & clarifications • Look at pricing separate / revisit benchmarking ** Variations on this approach used also This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  32. Admin & SRM Contract Administration

  33. Admin & SRM E&I Contract Admin & SRM Performance Measurement Much like a school should measure contract savings, we also measure the utilization of our contracts This is for the sole use of the intended audience and may contain confidential and privileged information. Any unauthorized review, use, disclosure or distribution is prohibited. All supplier names, spend, pricing and contract information are strictly confidential.

  34. Questions and Answers VINCE Patriarco: Phone: 607-428-0543 E-Mail: vpatriarco@eandi.org FERNANDO Prieto: Phone: 773-376-0988 E-Mail: fprieto@eandi.org