© 2011 Sixhills Consulting Ltd• Understand “who buys what’ from whom at what price”– Volumes– No. of suppliers– Product specification– Contract– Savings levels• Understand the procurement processes– People– Processes– TechnologiesUnderstand ExpensesProductPriceProcess1. Reconfigure Demand Specification2. Understand Supplier Economics3. Redefine Product and Pricing Metric4. Increase Leverage Through Competition8. Implement Process Improvements7. Leverage Technology Developments6. Adjust Price Setting Mechanism5. Unbundle Pricing• Challenge in-house specification of needs• Push for lower cost alternatives which meet identified needs• Consolidate buyers• Understand economic drivers of supplier• Redefine product specification in light of economic drivers• Identify lower cost materials or processes that still meet in-house need• Ensure risk resides with the party who controls it• Align supplier incentives to client organisation goals• Re-specify contract around meeting end, not intermediary, goals• Identify alternative sources/suppliers• Communicate credible threats• Co-operate with other buyers• Understand pricing basis broken down to component level• Define optimal product bundling to optimise price negotiations• Identify optimal price setting mechanism• Tailor contract length & terms to category trends• Use multiple negotiation rounds• Strategic sourcing• Price finding • Transaction automation• Supply chain planning and optimisation• Remove redundant processes• Reduce error rates– Process simplification and/or centralisation– Process automation• Increase compliance– Align personal incentives to corporate procurement policies– Implement measurement of complianceWe have identified nine key savings levers based on micro-economic understanding of buyer and supplier relationshipsSavings Levers9. Review logistics, warehousing, inventory arrangements• Model optimal supply chain configuration• Understand benefits of spot versus long-term partnerships• Undertake inventory management review including options for re-aligned ownership and supply chain visibilityAggressive SourcingP6
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