The proper identification, appraisal and engagement of suppliers for the acquisition of goods and services is a crucial function for any Chief Procurement Officer - and this role is one that requires incredible skill.
So what tactics should any CPO worth their salt be on the lookout for when embarking on a sourcing undertaking? Here are some things to keep in mind:
1. Have a thorough understanding of your spend category
Preparedness is vital in procurement. For this step, you need to do your homework and ensure that you know every detail about the spend category you're considering. For instance, if the category is something as foreign as recycled corrugated packing, you will need to be concerned with things like the category definition, patterns of usage, grade types, operating unit stakeholders, etc.
The goal at this stage to become an expert in the category. Just as you wouldn't travel to a foreign country without doing some background research, you shouldn't commence sourcing without familiarising yourself with the category.
2. Evaluate the supplier marketplace
Once you have a keen understanding of the product or service category, the next step is to dutifully assess the supplier market. This appraisal gives you a great idea of who the key category players are, the underdogs, their respective dynamics, marketplace trends and other best practices.
Additionally, you should simultaneously put together a "should-cost" report. While such a report might not always be vital in all cases, it is generally advisable to be mindful of such a document.
3. Develop your supplier poll
At this stage, you should prepare a survey of all suppliers (incumbents and challengers alike). Such a poll will enable you successfully determine the capabilities of the vendors.
The insight you're hoping to unearth with this survey is whether or not the current market capability and capacity meet your requirements. Also, it's a great litmus test to determine the viability of your project earlier on before any financial commitment.
4. Prepare the sourcing strategy
This is where you fully flesh out the sourcing plan using the information gleaned from the first three steps. Also, ensure you're asking yourself the following questions as you put this document together:
- How competitive is the supplier market?
- Are there any relationships that might be negatively affected by this proposed sourcing plan?
- What are your chances of leveraging better pricing?
5. Prepare your RFP
As you go about preparing your request for proposal, ensure that there is no ambiguity about your company requirements to all potential suppliers. Get as granular as possible: include everything from product stipulations, delivery and service mandates, pricing outlines, etc.
6. Selecting and negotiating with suppliers
At this stage, it is expected that you've thoroughly analysed and reviewed all the RFP submissions. If you require supplementary information, don't be afraid to ask for it - you want to ensure that you have a complete picture of all the applicants.
Once that is complete, narrow down the candidates (with the blessing of all senior stakeholders) and then commence with the negotiation process.
7. Invite winning suppliers to an "implementation recommendations" meeting
This is where you meet (face-to-face or otherwise) with the suppliers who have met all your requirements and you listen to their execution plans, review and fine-tune accordingly.
Yes, sourcing is a painstaking exercise - it requires a lot of back-and-forths, but it is an essential and unavoidable process in procurement.
Written by Pip Spibey-Dodd @Locomote