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Sourcing Excellence: Extracting Fact from Marketing
Overview A number of drivers may create a demand for any company to look at engaging a sourcing process. The drivers range from the tactical conclusion of an existing contract to enabling a strategic shift in site applications. Executed correctly, a sourcing process can deliver a company unexpected value, improved performance, and / or enable synergies with the new supplier. W. Capra has built upon industry proven processes with practical experience to create an approach that delivers measurable results. Our approach takes into account that organizations have different objectives and suppliers have different intangibles. By finding the right mix between strategy, governance and procurement practice, W. Capra's sourcing process will assist you select your next strategic partner. Strategy Alignment The first step when engaging a sourcing process is to define the future business expectations of the asset or service. Documenting the business expectations typically requires defining the strategic intent of the retailer and identifying other major initiatives that are dependent on the asset or service. Sourcing Process The foundation of any good sourcing process is to define the governance process and the negotiation strategy. The governance process is internal facing and should be agreed to by all key constituents prior to engaging any suppliers. Example elements of the governance process include naming the decision makers, identifying the decision criteria, and setting a schedule. The negotiation strategy is external facing and defines how the team will engage the market , what are key negotiation thresholds and who will be invited to participate. If both of these items are completed the foundation is set for a solid sourcing process. Engaging the Market When engaging the market to procure a strategic or costly asset it is strongly recommended to complete an information gathering process prior to requesting proposals. The following are the two most effective methods for gathering relevant, comparable information:
After you have gone through your information gathering session, its now time to reassess your strategic intent and write your detailed questions. We recommend reassessing your strategic intent due to the fact that typically the information gathering phase will conclude with the working team learning a great deal and the conversations spark new creative approaches. There are two primary philosophies behind the question writing process. One philosophy is to only ask yes and no or direct response questions. We recommend this approach if you are purchasing a commodity and the service that deliver the commodity do not differ. The second philosophy is to ask some yes and no questions but to supplement these with open ended questions as well. Using open ended questions (with the correct controls) allows a company to clearly understand the differences of the options. Reading the Responses and Decision Making While the suppliers are working on their responses to your request its important you prepare for their receipt. The following is check list you can use to make sure you are ready: 1. Decision criteria is defined and approved by the board 2. Reviewers are fully briefed on the sourcing process, suppliers engaged, decision criteria, and the governance process. Note: it is important to use the review process to engage the full organization. If done wrong, a sourcing process may hit political barriers due to participants not feeling that their voice has been heard. Simply engaging people in the process typically goes a long way to reducing barriers. 3. Reviewers have committed time to read the responses. Note: It is strongly suggested all review meetings are scheduled in advanced. 4. If financial modeling is required, base models should be created to minimize "working" time post receipt of the responses. 5. Double check that the governance board is up to speed on the process and is ready to make a decision. Note: If there are any open questions, the Q&A portion of the RFP process is a great time to address these. If the above steps are done you should be fully ready to receive and analyze the RFP responses. Once the RFP's are received each reader should review a scoring template to complete for each response. There are now software packages that can be used to quickly analyze results. If you company does not have this software Excel is more than capable. Request each reviewer to both score the RFP by component and holistically. Scoring the response by component will hopefully help to minimize any biases that may exist. After the responses are scored its time to aggregate the responses and determine a recommendation. It is recommended that all readers review the recommendation prior to the presentation to the governance board. If there are any material objections to the recommendation they should be noted and discussed. Finally, the recommendation is presented to the governance board. If the sourcing process was managed effectively and the governing board was engaged frequently the final presentation should not be difficult or that much of a surprise. Concluding Remarks Sourcing processes can sometimes feel overwhelming if the dollar amount or the strategic importance of the asset is large. Conversely, the process can feel mechanical if it is believed the decision is already made. W. Capra believes in both of these cases and for the situations in the middle, a sourcing process done correctly can assist in changing minds, influencing strategies and positioning your company for success. The keys to success are to ask relevant, engaging questions, to fully understand the intent of the purchase and to Extract the Facts from the Marketing material. For more information on W. Capra services, click here to contact us or call 1-312-873-3270.
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