Strategic Sourcing - Method

Design Procurement Processes

Lean Sigma Institute offers Design for Six Sigma and is abreast of best of breed technology to assist companies in design of procurement processes to optimise spend and recurring sourcing of products and services.

Lean Sigma Institute's looks at Strategic Sourcing through three key objectives; Position Assessment, Value Assessment and an Options Assessment:

Position Assessment

Company Overview - Understand what we have bought in terms of volume, price, from whom approved Suppliers, the CCRs (Critical Customer Requirements), the impact of this product in the business and CBC (Company Business Characterisation).

Identification - As an example; Understand the routes to produce a product, which raw materials are used and the available technologies on hand.

Strategic Sourcing - Through a RFI and subsequent a RFP to gain an understanding of the market as a whole; e.g. who are the Producers, what geographies they operate in, what price drivers are there according to Supply/Demand,

Analysis - Quadrant Analysis, Structural Analysis and Sourcing Characterisation.

Value Assessment

This is to understand the cost and profitability of the Suppliers so we are able to define the strategy to appropriately address actions related to price pressure (their low margin) or titration (their high margin), and use as a basis for any Options Assessment.

Options Assessment

To have a brainstorming session with internal partners to identify potential alternative strategies, e.g. product specification, make or buy, tolling, etc. For each alternative strategy the NPV is calculated and the best strategy is determined with the internal partner.

Lean Sigma Institute's Model

The Lean Sigma Institute model is an integrated model leading to strategic supply chain transformation through vendor management that is supplementary to the overall company strategic blueprint.

Ultimately the integrated model leads to digital transformation embracing innovation, integrating suppliers in the relationship and infusing the organisation with appropriate skills to enhance and sustain ongoing continuous improvement.

Continuous Improvement

Continuous improvement concepts like Lean Six Sigma methodologies, considered as philosophies of management evolving out of the foundations of total quality management (TQM), enable the link of improvement targets to both an organisations strategy and business results and are a breakthrough enabler for Procurement to achieve high levels of performance. The integration of Lean Six Sigma into the strategic sourcing model is a unique offering by the Lean Sigma Institute.

Data Analysis

A Category/Commodity and internal expenditure data analysis collection is a necessary first step and covers:
• Commodity/category spend, transaction count, commodity trend, # of suppliers, etc
• Product details (SKUs)
• Current Top 10 Suppliers in commodity area
• Identify departments/users that represent top 80% spend
• Subject matter expert (SME) review of data

Phase 2

This is the second phase of a strategic sourcing process. Lean Sigma Institute in collaboration with an IT solution provider would facilitate and support the development and provision of the overall role of procurement in the diligence of procurement processes and tracking protocols and methodologies within an overall strategy for strategic sourcing and manage, develop and train internal users.

Strategy for Strategic Sourcing

Lean Sigma Institute is ready and willing to talk with you about the overall approach and strategy for your strategic sourcing initiative.


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