Comprehensive Guide to Strategic Sourcing: Process, Strategies, and Success Factors

strategic sourcing part and the last 15 minutes are left for you the question and answers to avide the echo I would

again request that you please type up your questions and I'll be very happy to answer each one of them well friend with

this now let me go down to today's agenda so what we plan to cover up is

the overview of strategic sourcing what is strategic sourcing because this subject has become very popular in the

last two years I've seen in India many companies are trying to focus on strategic sourcing we'll walk through

this we'll try to understand what is strategic sourcing why Implement strategic sourcing and I'm short I'm

going to call as SS then next question come developing a strategic sourcing sourcing strategies

also important around the two words one is called strategic sourcing one is called sourcing strategy I'll try to

clarify both the issues around then the next one we'll try to cover up is a road map to implement strategic sourcing if

you want to set up strategic sourcing in your organizations what are the plan for that

around how is the mapping going to be road map going to be for that critical success factor also I'll try to touch on

so well friend with this let me start first giving you a very basic idea about the procurement process I mean you know

in a procurement there are two components

sourcing second component is buying to me buying is very basic I mean that means you have identified A

supplier you know the need you know the supplier it is just placing of orders so if you can see in the buying cycle it is

nothing but placing of orders receipt of goods and payments that's why some of the

softwares called P2P is nothing but it covers only the buying part but there's another

component which is called sourcing so sourcing is the one where you're trying to identify Supply

sourcing so in sourcing there are different type of sourcing I'll try to walk through with you on that whether

it's a reactive type which is called operational sourcing tactical sourcing and strategic

source so I'll walk through with you on that what type of sourcing are there and the one we are talking about will be the

focus would be on strategic sourcing now traditionally if you look around sourcing mean identification of

new and potential supplier so that is how we understand sourcing definition now the categories

of sourcing reactive so if I go back to 1970s 80s '90s Focus was all the time of

reactive you send a request to me I know from my history what suppliers can provide I place an order for that it's a

very reactive type so that's why the profile of procurement people was very low slowly it became

tactical that mean we took some idea of developing long-term arrangements with some suppliers for basically low value

items and low risk item so those item which are low values low risk like office supplies some of the items in

office mro items you made a tactical long-term Arrangements around so it was basically a tactical approach it's not a

very long-term approach a short-term approach while reactive is only as on today it's a very operational approach

so I just want to make it clear before I move further two components sourcing buying sourcing has got three

types reactive tactical and strategic now the definition of strategic it has got keep in mind

strategic sourcing is a methodology sourcing as a whole is a methodology whether it's a reactive or

technical or strategy so it's a methodology it's a process but it is again when we say

strategic in a reactive it is a purely process Tech itical is also to some extent process but when it comes to

strategic it has got three component one component is called organized second is called collaborative

third is called structured so when we say collaborate organize that mean it is not a one-time

thing you have to do it on a ongoing basis if today we do strategic sourcing get into enter into contract with

suppliers then if I say I've done my job that's not the way it has to be looked into Market all the time as you know the

new suppliers are coming into the market market scenarios are changing Supply Market is very

Dynamic so that is why I'm saying it's very organized so you have to do it on a ongoing enterprise

process the next one comes the systematic part so systematic means there is a process there's a procedures

and that procedure mean you have to follow step one step two step three up to step seven so these are the steps so

it is called systematic so everybody has to follow irrespective the category whether it's a direct procurement

indirect procurement you need to follow those steps around it's called systematic collaborative means if you

look back traditionally procurement has been very Silo function collaborative mean you work together you work together

with your partners partners could be in-house Partners could be outside in-house

mean those with whom you work for whom you procure for the engineering people for

the technology people your internal customers so you work with them so they are part of the team external means

you're working with the suppliers so keep in mind strategic sourcing has got three components is

organized it's a very based on it's analytical approach it's a methodology but based on analytic analytic is again

drives from spend analysis so three components organized systematic and collabora collaborative

means you're working with your team that's a way to work together now let me work further on

this it's good to know a little bit historical part up to 70s

it was all reactive sourcing if I look in India up to 1990 has been reactive now in the last 10

years last decade changes have started happening around during my stay in Europe and Us in those 25 30 years 80

was the time of re-engineering I moved to Europe in 80 sometime and that's a time we were all

the time focusing on re-engineering re-engineering the process re-engineering the the

methodologies and you know very much in those days Auto industry in US was coming under big competition from Japan

so in those time they were focusing a lot on re-engineering how to cut my cost how to make my products

competitive with the Asian supplier so then all the time the question came how do I cut my cost it became very popular

in 80s to cut down re-engineer the process staff were being laid out sometime but then somebody came up guys

50 to 80% of my cost structure comes from procurement staff is only contributing

20% so even if I make a re-engineering of my staff activities around out of 20% I can make saving of 5% 10% but if I

lick the big chunk which is the procurement part if any saving I can bring there a 15

20% it straight goes to the bottom line so this is how in 1980 it started picking up in us and

Europe the whole concept of strategic sourcing and it became more easier because of Technology had there been no

technology possibly this would have got delayed that's why in India since many companies have not really made use of

Technologies around so strategic sourcing if I look back since I came 3 to four years back around I see this is

become BEC popular in the last 2 three years strategic sourcing now this is again seven step

base I mean the original was seven steps I'll walk through with you those some people have made it six steps

like deloid some people say from if I look from the top level from the senior

management level it is a five step but the end of the day whether you call five step six step or seven step it covers

everything around I'll walk through with you all those now some companies who adopted strategic

sourcing did not succeed well I would say 60 to 70% did very well I mean if I look at those case study the saving was

to the tune of 25% those who did not do well the reasons for them were I'm trying to

touch this because some of you might be thinking of implementing strategic sourcing I want to tell you what could

be the pitfalls the first could be the philosophical tension philosophical is some people think

competition competition that's the only way to survive while other side of the game is

collaboration collaboration work closely with the supplier so if I look from the public

sector for them competition is the only way but you also know even after competition still there are too many

scams around not necessarily we getting the best price so some companies have taken

a hybrid approach of competition and collaborations again I'm calling the word in the good old days we used to

keep supplier at arms length go through competition who gives me the best price I take

it but now the concept has moved from arms length to partnership that's what we're talking collaboration working

together so that's a philosophical tension was there sometimes rigor was not there

around I know it came up in 80s in the western world but some people were trying to make a

shortcut procurement people say oh guys I know this supplier so there was for the namesake strategic sourcing but

there was no sincerity to do the market survey to do the supplier study around so this is why strategic sourcing did

not fly much the next was I think the tools and technology

part I mean the tools and technology which came up if I look back 25 30 years back they were not not really matured

enough but now if you look back in the last decade the tools are much more smarter you can get realtime data spend

categories have improved around I remember my own case we were trying to analyze the data for us office supply

was a major spend around and I was we were trying to analyze it and then we found there were too many varieties in

the papers and office supplies how do I do it and that's where we came up with the

concept of categories United Nation developed called United Nations common coding

system those days which became un spsc I mean this was my baby which I started in 88 in building it up and

later on we gave it to an NGO to really Market it so this was the one we worked on we thought we need to develop a linga

franka if you don't have a linga franka we cannot really identify the spend part so to do the spend part the Ling of

franer which came unspsc categorizations so this is how we worked on it well friend up to now what

I've done with you is understanding the different type of sourcing little bit historical part of strategic sourcing

and now what we say is what are the goals for this strategic sourcing I know one or

two people have sent me the question in advance the goal is to reduce the total cost of materials and services

obviously we are going into this game I mean so natur first focus is on the cost I'm using the word total cost I'm not

calling price so you have to understand what is total cost of ownership second is

leveraging internal expenditures while rationalizing the supply base so I have a supply base I

might be getting same item from 10 suppliers can I rationalize it can I Leverage The spend part can I cut down

my cost around the third part is optimizing internal external supply chain I have a

supply chain within my office within my organization I have a supply chain with my suppliers suppliers suppliers have a

supply chain how do I make it much more integrated the next one comes the total cost of ownership I'll touch on this the

next is the building organized competitive position through continuous Improvement as I told you in the

definition of strategic sourcing there has to be a continuous Improvement if it is not continuous it's not a one-time

job don't think that I've have done partnership with one supplier for next 10 years no you will have to go through

it you could do it after two years three years but there has to be done on a regular

basis so primary objectives again I think I have touched already I'll just skip over this

here understand the total cost of ownership I'm trying to clarify some of the terms first before I jump to this

process part of doing strategic sourcing so far most of the procurement people when

they Select A supplier the criteria is price price pricee but I'm sure many of you by now

know we are moving from Price concept to total cost of ownership some people call life cycle costing when it comes to

equipment so it is not the purchase price it is the price what I pay for the practice some I some process requires a

long process around is a cost around some needs again simple example I'll take up in our daily life is motor

vehicle if I buy a car one car May cost you a little higher than 10% but may save you on the fuel side so if you look

around the life of 5 years or six years of your car how much you're going to spend on the

fuel if fuel saving is there the mileage is better so that is also part of my total cost some vehicles require more

maintenance some require less maintenance if I add up all those over the lifespan of 10 years or 5 years of

my vehicle how much is going to cost me so the TCO concept is becoming very popular in most of the company but the

only negative part is to do the TCO you need various data around if I take case of car I have to

understand the mileage I have to understand the the downtime downtime of the cars how much is the maintenance

cost all those elements had to be put together to work out my TCO so keep in mind today's concept is not on today's

price it is a TCU concept let's say if I'm in an automobile company I buy a part and I

know if this part will work for whatever two 200 200,000 kilomet without any breakdown great another one

I have to change after every 50,000 so that mean is extra cost for the buyer so you need to work out the total cost of

ownership here is again one the cross functional team what is cross functional I'm trying to clarify a few terms before

we walk to the steps of the methodology of strategic sourcing traditionally what you do is you have an engineer you have

a materials manager they will tell you guys this is what we need I'm a planning person I'll say okay for next one

production I need these these item it goes to purchasing agents then I procure it and give it to

the store people it's a very Silo function in a strategic sourcing we make a team so there's a team leader team

leader make a cross function team people from Finance people from Logistics people from marketing people from

engineering people from R&D we work together it's a joint responsibility so this is where we call

it's a cross functional approach it is not a silo approach it's a cross functional

approach so I'm also touching this part on sourcing strategy now the sourcing strategies

also we need to understand sorry guys we just missed few slides now coming back to Source now you

heard the word from me strategic sourcing and the next one was sourcing strategy so the sourcing strategy

is how do I Source it sourcing from the supplier angle who could be my partners who could be my leverage items

where I have to manage the risk and the last one is this one is called around centralize should I do centralize should

I decentralize should I simplify that's the way it's around now this is again based on Kik

Peter Kik who was the first person 1983 who came up in the Harvard Business Review he split all the procurement into

four mat 2x2 matrix so this is how it is based on now ease of

implementations now if you look around the spectrum of procurement strategies one side is a volume

concentration you try to consolidate is the most easiest job the last difficult part is a relationship building so

relationship building this is where in the Strategic sourcing we focus a lot on relationship we also Focus on global

sourcing because we are not now like in the traditionally we not bound by buying locally I'm bound I can buy from any

part of the world if it makes savings for me so this is what the crossz model is

you split your things the complete procurement into four ma 2 by two Matrix so on the xaxis is the degree of

difficulty and saving opportunity difficulty means if I got more suppliers my difficult is lower but if you got

very few suppliers there's a monopoly then my degree of difficulty becomes higher

similarly on the saving side more I spend obviously opportunity is on the high side if I spend less my spend is

less it is on the low side I'm covering this because at the end of the day when we start strategic sourcing process it

is all about spend management and spend management we try to do it in these four 2x two matrics and try to see which are

the one high medium priority like in the Box two lowest priority highest

priority and the high medium priorities around so you can imagine the highest priority come where I got degree of

difficulties low I got more choices around but saving opportunity is very high naturally that becomes my highest

priority from strategic sourcing so strategic sourcing I have to Define where do I put a focus on highest

priority highest medium priority this is where we work it out okay friend again this is same cic

but in a different modality to do what type of negotiation I can do with different type of suppliers it all

depends on the spend part if spend is coming under strategic items is a different approach

if it's a bottom leg item it's a different approach non-critical items a different approach leverage item by

different approach of negotiation so this is again I'm putting up in the spend part so if you guys have

understood so far then I can move to the next ones so here we try to put the various

spends categories put them into the graph which category I need to focus on so now we start the journey for

strategic sourcing so again I want to repeat few things good to understand before I jump into this after all it's a

process or a methodology so for this process I need to understand cic Matrix 2x two Matrix I

need to understand spend analysis I need to understand the different type of sourcing like reactive

and this total cost of ownership so once I've understood those terminology I'm ready for the journey

now for this journey if we want to move from average procurement process we want to move into

world class strategic sourcing keep in mind it's a time consuming and very challenging that's why you need a senior

management support around it has to be top down if the top management is not

supporting strategic sourcing is not going to fly strategic sourcing Rec as a value

Creator it adds value it is not simple a process to buy something it creates a values throughout

the company it's a change agent it's a innovator even in the public sectors even in the US government now it has

been included strategic sourcing as one of the choices available for better

procurements so in the good old days everybody thought public procurement isn't needed when Obama came as a

president I think he ensured that the public procurement is in line with the latest Technologies or

latest best practices of private sector so strategic sourcing has been made built into the acquisition

guidelines okay friends now here we start the seven steps so strategic sourcing is a

methodology is a process seven steps very known very well known for seven steps some people over

the time have changed it some have call in into five some are calling into six those who call five ultimately

activities remain same but they combine like one and two could be combined as one so let me walk through each one of

them the very first is analysis you analyze your data you analyze your suppliers you analyze your spend and the

next come develop commodity teams you need cross functional team sourcing Strat

stry what type of source this is why I explained you in the beginning sourcing strategy how should I do it will this

item be a very leverage item is this item a strategic item is it a routine item should I buy

centrally or should I decentralize it think a big company like MNC which are all over the

world which item should be centralized to get the real Leverage which item I should allow people to

procure of their own so this is where sourcing strategy becomes very important to us identify and pre-qualify suppliers

supplier selection and Contracting integrating the suppliers and monitor and followup I'll explain further more

on this so this is again same story so each person each company has come up with

their own approaches around this is another one who has come up with the five steps so five step means spend

analysis build specs sourcing and supplier qualifications you contract negotiation

and implementation this is how high level people think around I'm just giving the

different models around how people use it the very first one says opportunity assessment identify and

prioritize you know you are buying so many items around you can't put every item into strategic sourcing

you need to identify which are low hanging fruits so which are the item I should

focus first which gives more credibility to your procurement function if I spread

myself into every item every category I may not be able to do it's very time consuming then next in this one is

commodity identification market analysis I think is very important around to understand

the supply market supply Market is evolving changing Supply Market I'm talking not within your country or

region it could be over the world develop commodity strategy execute acquisition strategy

and the last is manage the performance around this is what the Deo made they also made same thing into six steps

around they say first is to assess opportunity assess internal supply chain assess Supply Market same thing

develop sourcing strategy Implement sourcing strategy and last instal okay friends with this now you got a fairly

good idea what are the steps required around so let me walk through the very first one assessing the opportunity

part yeah I know some people are raising question I'll come back soon so give me another 10 minutes before I walk through

this and then I think the Forum is open for the question later now actions are you need to make a Time Charter team

group around identify the stakeholders document size of the buy then document

inventory then we certify the buy communicate the team scope around now this is where you need to

identify the quick hit around okay guys now let's start with the seven step process because

traditionally strategic sourcing as taught in the academic word is all seven steps some Consulting companies have

made six steps some have made Five Steps But ultimately it is all seven some have combined the two steps into one and

calling as six some have combined three into one so let me start with the very first one now before beginning the first

step for a a particular category you need to start the diagnostic diagnostic means I'm talking

of spend so there are many good softwares available but keep in mind the data has

to be clean if data is not clean then certainly garbage in garbage

out your spend analysis could be wrong so diagnostic divides all spend into

categories then divides further spend category by business units I may have 20 business units different locations in X

country versus y country I need to do those things together you can imagine 25 30 years back it was impossible but

nowadays with the computer systems working on a realtime basis I can collect my data as on today what is

spend in each country around so spend categories are then classified based on competitiveness and compared to the

internal impact around so based on this I think we try to do the diagnostic once it is

complete then we try to divide the whole corporate spend into categories divide spend category by

business unit locations and then we also try to do is to offer valuable

insights keep in mind your spend should be at least around 80% I know in many

companies procurement doesn't control the complete spend many things are done by individual

units if you want to really get a benefit of it ensure this is why I said is a top- down approach the top

management has to support at least 80% of your spend of procurement has to go through spend

management s spend categories should be classified according to supplier Market competitiveness and obviously we talked

about k model but once you ready with the all the diagnostic you're ready for the

seven steps step one fully understand the spend so you're trying to do historic

expenditures and volumes expenditures are categorized by commodity and subc

commodity expenditure by divisions expenditure by supplier and future demand projection so

demand projection is also important when you are planning to go for strategic sourcing the next part step to com is

now you done your spend part that's a very starting point second is you go into supplier market

assessment now supplier market assessment means you're trying to understand do we have alternate

suppliers for this I have an incumbent already they might be doing great job but I need to know who are the other

suppliers available understand the market supplier supplier Marketplace the trends and you should

also try to look at should cause because your top management might have told you this item is a critical item it's

costing me a lot can you cut down the price by 20% so you need to develop your should cost analysis of

front now step three is again the assess the supply Market I'm just trying to see identify the potential sources of

Supply evaluate Industries perform supplier comparisons perform supplier assessment

identify opportunities this is another one again to do your supply market analysis I'm

sure many of you are knowledgeable about the porter forces around potential interests existing suppliers customer

choices substitutes all these factors work together to give you how five forces are working around

step three again I've touched already and now let's come to step four building the strategy

part how competitive the supplier Market is how supportive your company users to testing incumbent you know very well

whenever you want to change the supplier your existing customers inhouse they may not be very happy this so guys

they're getting into trouble I know it's not easy so your supplier relation management with the existing supplier is

so nice people don't want to change it so what alternative exist to competitive assessment so these are the step four

I've walked through with you guys step five so up to step four what you done is you done the diagnostic that's the very

beginning you did the spend management category wise branch-wise supplier wise product wise then you done the market

also analysis now you're ready for after you done the four steps now you're ready for

doing the bidding process rfx X could be a p x could be I rxx could be anything I put down in this one slide so rfx is a

competitive process I'm a request for it could be CU like quotation it could be request for

proposal it could be invitation to bid now rfx could cover obviously the specification

delivery service requirement evaluation criterias terms and conditions TNC pricing structures so when I say

specs don't take specs as it is that's a beautiful thing of having a cross functional team in a cross

functional team I got Engineers I've got Supply I've got all cross functional people people we can standardize the

specs we can change the specs if it helps us to cut the cost and improve the quality if in the good old days my specs

was tailor made for my company but now I see I can buy rade product from a market why should have my custom made specs I

should go with a custom readymade product cut down the cost so you go through the bidding

process and select this one selection is the next step six so now you've been through the biding

process you select it you negotiate sourcing the team shall be an evaluation

criterias and finally you have to make up a senior executive has to be briefed and make a final approval around so this

covers your six steps around now come the last step last step mean you have identified supplier communication with

them now if it is an incumbent supplier then already the supplier known to you shall cover changes in specs in case you

made it in case you want to make changes in Delivery Service pricing model should be communicated if it's a new suppliers

your communication plan should be much more in detail because this is a new supplier in

transition and the risks are potentially higher with the new supplier well friend this is where I wanted to tell you again

strategic sourcing is a very methodical it's a very disciplined approach so these are the seven steps this is how

you see in all the books and magazines some companies some Consulting companies have made six steps some people have

made five step but it covers in principle all the requirements around now here I'm coming the last one

before I give the floor back to you for question answers the Strategic sourcing plan

process part so we have understood what go go behind strategic sourcing now we're talking about the

whole plan process if I had to do as a manager in your office I'll Define the scope I'll Define the

responsibilities then I will try to do my whole plan outlines so in the plan outline what I

will do is company business strategies because I have to align my Approach with my business

strategies I have to develop strategic sourcing team I need to collect the data

historical annual volume price changes by suppliers how much was the lead time how much the cost Improvement history

around then I will also do is who are my current supplier their location so this is what goes behind

before I really implement the plan process location share of companies spent if one company I'm buying 80 % of

their product naturally I have a leverage to cut down the price not at the risk of closing the

company but at least I have a leverage but if I'm only buying 5% of the suppliers product naturally they won't I

don't have much leverage there supplyer financial data the quality part the delivery part Innovation is the supplier

able to come with innovative ideas around Supply relationship so this is what I look at the current

supplier my current processes how do I select suppliers is it the right way is it too long is it too intensive labor

intensive can I cut down can I make use of Technologies so this is where you need to look around Supply Market

overview suppliers in Market buyers in Market is it a supplier Market is a buyer's market that makes a big

difference the trend the cost Drive cost price analysis I think this is very important

around because most of the time when we negotiate price we just oh this we go with the competition so and so told me

this I go with the lowest price but the question all the time comes is it the best

price have I done my calculation if based on my calculation what should be the should cost if that should cost

matches with that supplier cost then it's fine now strategic sourcing SS I'm calling as

plan objective you could have a short-term basis 18 month or less you could have objective on the long term

where you're trying to do is the total cost improvements and you're trying to do

quality part Innovation Supply relation management green initiatives supplier selection keep in mind all this goes

behind my strategic sourcing plan so the team leader and the cross function team that to work very hard so most of the

organization what you'll see in the organization structure there's a separate team for strategic sourcing and

there's a separate team for transaction you may call procurement or you may call reactive procurement so two are

different so one team is working on strategic part building up suppliers and then procurement people

who are the other transaction team they can use this supplier Place orders around they become simple

buyer iCal success factors again I'm trying to make it very clear it has to be a vision there internal cooperation

is very important around top down I'm again calling end users data Integrity data has to be clean data has

to be clear and appropriate use of Technologies strategic sourcing will not fly without the right

technology so technology is a key element to this on technology I can say some input

that I don't know whether you're all aware Gartner there's a Gartner magic Matrix so Gartner magic Matrix they do

come up with all they analyze all the technology in the market try to put them into different whether who are the

leaders who are The Visionaries who are laggards so you can get a fairly good idea which technology is the most

popular one in the today's market which has the best strength weakness they try to give you for each Technologies you

can access this through even Google online now lastly before I wrap up when we talk

about strategic sourcing thing strategically you have to analyze the

data it has to be analytical it is not just getting three quotations and saying oh I've got the best price it is you

have to think strategically what should be the cost who are the market how is the market changing what is affecting

the market May your total cost so you have to move from purchasing price to total cost concept and you have

to work as a team not as a silos so friends with this I'm trying this is now I think

closes from my presentation side so let's I think open up the questions part around

Arun so if you can start writing your questions I'll be very happy to answer okay friends I'm just walking through

questions okay so what are the main component of strategic sourcing I think I told you

the main components this came from sain so Sachin came up with this question the main component of strategic

sourcing are which I told you in the beginning I mean there are seven steps but the key component is it has to

be I mean it's ongoing process first thing it has to be disciplines analytical thing spend analysis so I

think I covered all those parts around tcos so they become the key components for

you strategic sourcing another question is how do we achieve how do we ensure sourcing strategies is supplemented

effectively and best ways to my year I think har Harish Kumar Chuka has asked for

this questions around sourcing strategy implemented effectively I think implementation is

important means again I told you it's a top- down approach you need to have a wonderful team

leaders who can carry the team around it is not a silo team if it's a pilot type function this will not

fly then there has to be commitment from Tom to make it more and the data has to be clean the data has to be very

effective around the next one is [Music]

from from the College of uh Management in Hyderabad India is one of the largest producer of varieties of mangoes in

Andra Pradesh alone accounts for 70% of this and most of them are spoiled and are rotting due to poor post Harvest

storing Technologies now having booked the forms well in advance one has to Define advantage in terms of source

strength exporters exploit this situation my question is how can they exploit

this well friends I think your question is is not from the sourcing angle it is more from your supply chain angle I

think we could answer this question off the line because this is more about the supply chain I did same project for

another company like Mother Dairy they also had same thing from farmer to dining table so I think we could do this

question separately around because this is nothing to do with the Strategic sourcing it is how to optimize the

supply chain so I think I can take care with you separately on this okay the next question

is Canan Mala K I know I'm sorry I had to come back to your earlier question also you sent me by email I tried to

come back so slides are not changing said around okay now they're working I hope you were able to see all

the slides later okay now next one is how important is a freight cost would

be if we Source I think this is again supply chain

question I think Ain has come hi Ain I know you raise a question on inco terms my inco term is

FCA do we go to LTA for Freight forwarders or now inot terms is free carrier that means you're only providing

up to the carriers so it's again with the logistic part and the negotiation strategy I

would call it Ain again I'm skipping this question on inot ter because this is

uh again related to Logistics part so I don't want to take the whole discussion out here we're talking of

methodology process how to implement strategic sourcing so it is only about sourcing

part not the distribution because logistic is part of distribution can the value engineering

concept I think meraj Ansari has raised a question about the value engineering I would say yes value engineering is very

very important around as part of strategic sourcing I would say instead of value engineering I will call Value

analysis because you have the products on the drawing board see the one has to keep in mind there's a difference

between value analysis value engineering value analysis is done once it is on the drawing board value engineering is done

when the product is already being procured around so I will use for both stages for strategic sourcing I'm

already made buying the product in the past I could use value engineering I could change the specs and cut down the

cost around suchin as come how do we how we can monitor results of implementing

strategic sourcing it's a very good question suchin basically yes when you're putting

so much efforts so much management time you want to really see are we really making savings

around I can tell you from my experience around the savings could be easily 20 to 25% now how do we meure it you have been

doing in a very traditional way you know how much money you're spending for X item let's say I'm working in maruti and

I'm buying transmission boxes now this transmission box costs around 5% of my cost of the car so sales

cost now if I can cut down that 5 person to 3% or 4 person I'm state with saving one or two person around so this is

where you need to work it out how much it was costing me earlier now I made a long-term arrangement with the supplier

I'm not going through the bidding process every time I made a long deal with the

supplier and in the process I'm able to negotiate better so you will be able to automatically see how much savings you

brought plus you must have seen within your office you cut down the processing cost also so so that also saves you so

this can be easily documented softwares are available to help us on that now set storing in Indian

Industries do we have any documentation yes smme again is all about leverage you

know you have to keep in mind strategic sourcing is all about leveraging and spend now if an SM my Leverage is very

small so sometime this may not be practical so so this is where smmes could make an

exchange let's say there are 20 smmes in one place all smmes are buying the same raw materials if you can make a common

exchange then naturally you have a leverage this is where I can do the Strategic sourcing Hospital industry

I've got 40 hospitals if each one buys I may not get a leverage but if I put them together I get a more leverage I can

make a much more savings and impact on it so I I would say for smaller companies they need to develop a bigger

leverage by joining together with other companies I remember one case when we had a last time workshop with IBM one of

the guy came from one of the company he says even that was a big automobile company they said for our small

companies the Steel part we buy on their behalf because that they may not get a good deal so when they join with the big

companies they get a better deal better deal for that now Ravi Chri has come up with do we

have any documentation knowledge of this as from my knowledge Indian companies don't take sourcing seriously I think

you're very right we working on it we did a study recently on procurement what we call the

trends of 2014 strategic sourcing is still very low Edge only the few

mnes few big companies have started getting into this I would say only 5 to 10% of the companies while in the

Western World it started in 80s when I was there it was again same status what we are today in India today I would say

in the Western and the US even in the Japan 60 to 70% companies use strategic sourcing but the trend is growing up I

see more and more when I see the job are in the carriers openings people are looking for people experts who

understand strategic sourcing so it is becoming serious issues so far it was not

there now there's a question from natural is valued by some agencies that as required by CNN

IBN why only Gully Brothers in karatas for coal Amani for gas

I think again I know there are good questions I'll take up separately with you guys I think this needs a little bit

much more other there's a political component or there is component so this is a question from kamaka I I think I'll

come back to you separately I got your email I'll get back to you on this now this is the question from AA

how can you explain how should the costing is done can you provide a DA case study on this

uh the costing can be done by I don't know some of you must have done ABC analysis

part ABC costing around those with the finance this is where I mean is again separate agenda item I don't think I

will be able to cover up justify within next one or two minutes so really need to work it out the direct cost indirect

cost so if I'm trying to buy something I must know what is the direct cost of the labor what is the raw material cost

around what are the indirect cost around then combine the things around then I work out my costing but it's again it's

a separate case around I used to remember when I was doing MBA 35 years back in the US they used to be called

activity based costing so it's a big separate subjects around we can discuss on

that but those of you who are doing certification like cpsm there's a separate module called cost and finance

and in that cost and finance is a lot of focus on how how to do price analysis how to do cost

analysis we do have case study RI with us I think we can share with you some of the

one now I think ja Krishnan has come up with the questions if you can use strategic sourcing in a supply dominant

Market I agree with you if it's a supplier market then they will say guys either

take it or forget us or be on the highway so I got your point in a strategic

sourcing if I go in a very isolated thinking it's a bu supplier Market one will say it will not work but even in a

supplier Market if I'm able to assure them regular partnership working together giving a bigger business to

them I think it will help to some extent not to that extent but certainly it'll help in a bars Market it helps a lot but

in the supplier Market to some extent yes now Ravi has come up with a question on some good software on spend

management I think IBM has got emporius jaas has got ARA has got there are many around I don't want to say

which is the better one you have to find yours requirements around here again I'm quoting you

Gardner magic quadrant they have done a wonderful work for all Technologies they'll tell you strength and weakness

of each software so you can check around which is the best one so so I will not like to say which is better than others

but that I think independent body will tell you which is better enough if you want from me I can send you the copy of

the quadrants I have with me actually I was thinking of showing today but time was short

now Mr Data has come with a question most of the company use msxl I think that was ri's question how do we

improve acceptance Behavior within and across the business division where onshore and offshore acceptance is

critical for selecting a based on total cost of ownership how do I understand the different categories

in SP I think miss you raised a very good point I know it's a question of carrying

the team with you this is where I said very beginning it's a top- down approach certainly you will play a key role as

the chief of procurement but it has to come from the top down but obviously proposal has to go from CPO to the top

people so maybe I can help you later on on this if you want something on this I can send you some of the ways how to

manage it then sandep B has come category in span is there any website or book to get the

on category yes sandep there is a book available you should go to www.ps.org

unspsc stand for United Nation standard product standard classification this was my baby I developed in

8889 and now independently it's a United it's a undp product owned by United Nations but managed by a NGO around in

New Jersey so this is available I think this will help you a lot how to implement strategic sourcing

in EPC contract Ro now ni has raised this questions now ni I think is a wonderful

question when we talk of EPC contractor it could be any sectors around strategic sourcing are saying seven

steps so there's no difference you might be in a health sector you may be in the auto sector I know it started from Auto

basically in 80s but nowadays the Strategic sourcing is used in all the sectors around so you can do it oil

sector same seven steps around if you need any further clarification on those steps I'll be very happy to link up in

your sectors around okay are there any bodies like ISO who certify organization real

practices I think money is asking is there any ISO certification no so far none now Mr n has raised can we share

this presentation in continuation of seven steps role of contact performance yes I

think this will be uploaded so whatever we have gone through all the slides today this will be uploaded today so by

today evening you should be able to see in our website and you can also see in the YouTube as

well so when you're trying to go on our side you can click news and webinars so when you go to the webinars you'll be

able to see it and YouTube also you will cover it now I know questions are there from

Ravi money AJ now also how do cpim difference from your exams now a you raised a good

questions around cpim now that is purely on Inventory management certified professional

Inventory management that is a focus only on those people who want to be inventory managers cpsm is a broad thing

it is for those people in procurement logistic distribution CRM SRM who want to grow up as supply chain manager

supply chain leaders so it's a different cpsm is for them now companies give due weighted to

this now Harish you have come up with does approach change from a supply or

Services sourcing perspective no whether you're doing sourcing of goods or sourcing of this arish there's no change

around I will certainly share the case studies I'll be sharing very happy to share some of the I think in future

we're trying to put all on a website so more and more people can share this well friend I don't see more questions on

this so if anybody wants to come up okay ni you have raised up the question on difference between ISM cpsm

and CMA equalent certification now here I don't want to Market cpsm Per Se it will not be fair ethical for me I think

you should do is go to the website Wikipedia has done something comparison of various International

certifications so I don't want to say much on it cpsm is the oldest one in the world and the first in the world so I

leave it to you check up around Wikipedia how comparison each one has own plus and minus I will not say so you

have to see what suits you those who are working in procurement I will say cpsm those who are working in different

fields they may like to go with different certification well friends I think this time is

getting over so if anybody wants to raise hand I can remove the mute and then I can see

AJ is there hi AJ anything specific uh nothing specific

sir actually uh I just wanted to ask you about the same question which I had because you were saying that uh the C I

am and uh I mean various other certifications so since you have already explained it I think that answers my

question which you have I raed it long back so yeah yeah thank you than lot okay now anybody else wants to raise a

hand I'll then make it anyone else who wants to raise hand I can see n has come up

so marriage has come sorry Mr Mr Ansari hello Mr

anari hello hello hi Mr good morning good afternoon go

ahead yeah actually I'm IND I'm Saudi Arabia so I want to get certification is it

possible to register for here oh yes certainly so send us a quick email we'll be happy to answer those

questions okay okay thank you very nice no my thank you my friend okay my friend the next one I'm taking Niha

now Nia can you hear me hello Hi how are you yes good thank you uh sir actually Al I raised a query to ISM on itself

that can I get the question bank for some more questions because I'm uh I I'm preparing for exam one cpsm and I'm

having a this diagnostic kit but I just wanted to be sure like little more questions or something because I'm not

sure whether this study material is okay or I need to cover it more or how how was your scoring if you and I don't want

to ask in public but if your scoring is about 80% you're ready for exam if scoring is not 80% started oh okay then

I mean I think then that is good enough to be on a diagnostic kid if diagnostic kid if you do it 2 days

before exam and you get 80% you ready for exam but I think you can ask me

separately we'll try to send you some more questions we can send you not a big issue anybody else wants to raise

hands okay friends with this I want to thank everyone one for your patient hearing let's keep the con connections

on I mean the next one we want to do is on negotiation

so I think Ravi has sent me just now yes good question please provide some good reference books apart from

textbooks yes I can provide you some extra study materials around I mean I'll be happy to RI if you

could send a quick email to us at least then it gets recorded and somebody will certainly send you an answer for

that okay friends with this I want to thank you all for your patient hearing I know it's a for many of you must be a

weekend type so again thanks I wish you all the best who are appearing for exams so next I think what we plan to do is

subject like negotiation if you want us to cover any other subjects please send us your request we'll be very happy to

cover like this like this one hour session on any subjects relating to supply

actually we have planed negotiation in the next discussion but I leave it to you whatever you thanks again everyone