1.
Procurement Strategy Development
Webinar
2/20/2020
David Millington, M.Sc.QSM, NPDP, CL6σBB, SPP℠, SPSM3®, CM®
Director of Education and Product Development
and
Ron Crabtree, CPIM, CIRM, CSCP, MLSSBB, SCOR-P, CSCTA
Executive / Organizational Transformation Coach
1
Copyright by Next Level Purchasing Association, 2020

2.
You Will Learn to:
Understand NLPA’s 10 Phase Approach for World Class Sourcing
Understand how to leverage Customer Requirements
 In developing your Procurement Strategy
 Realize Enhanced Customer Experience
Prioritize your future learning
2Copyright by Next Level Purchasing Association, 2020

3.
Poling Question 1
Rate yourself – how would you rate your
personal expertise in Procurement Strategy
development?
Which number best describes you?
1 – Novice; my first exposure to this subject
2 – Aware of it, but no training or experience
3 – Have been partly trained and some experience
4 – Have been fully trained in Procurement Strategy Development
5 – I’m an expert in this topic with 20+ years experience in Procurement
Strategy Development
3Copyright by Next Level Purchasing Association, 2020

4.
Goals of Procurement Strategy Development
4Copyright by Next Level Purchasing Association, 2020
• Reducing Supply Chain Cost
• Reducing Supply Chain Risks
• Leveraging Value-chain Analysis
• Examining our suppliers, organization, and customers to determine how to foster
better integration & value creation
• Selecting and rewarding only suppliers who are aligned to our Value Creation
Objectives
• Simplify supply chain activities and remove non-value added activities
Supplier 1
Supplier 2
Supplier 3
Organizational
Processes
Customers
Inputs
Outputs

5.
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6.
Leverage 10 Phase Approach to World Class Sourcing
6Copyright by Next Level Purchasing Association, 2020
Phase I: Objective Definition
• Communicate purpose of sourcing initiative
• Specify ultimate goals to Fulfill Customer Requirements
• Determine milestones
• Involve entire affected staff in the process, assign responsibility,
and emphasize individual accountability
Phase II: Current Business Analysis
• Record current purchases, spend, supply base
• Identify opportunities for impact
• Identify threats to success and develop threat avoidance plan
Phase III: Requirement Determination
• Create, revise, or validate specifications applying value analysis, standardization
consideration, and/or substitution evaluation where appropriate
• Forecast demand, involving end users and stakeholders where appropriate
• Determine supplier qualification and selection criteria, involving end users and
stakeholders where appropriate
• Define target commercial/legal terms
• Define supplier performance metrics and initiate development of performance
reporting system
Phase IV: Market Survey
• Identify current suppliers
• Find new sources
• Identify opportunities for special categories of suppliers (disadvantaged, local, etc.)
• Identify key supply partners
• Conduct Porter’s Five Forces analysis
• Note “red flag” suppliers
• Prequalify suppliers
10 PAWCS

7.
External Environmental Scanning
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Good Procurement Strategies
are an
effective response to
Environmental Factors

8.
Leverage Internal Customer Requirements Matrix
8
CRM (I)
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9.
Leverage Internal Customer Requirements Matrix
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CRM (I)
Critical Input for
The design of
Organizational Processes

10.
Leverage External Customer Requirements Matrix
10
CRM (E)
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11.
Leverage Customer Requirements Matrix
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CRM (E)
Critical Input for
Supplier Selection | Cost Reduction

12.
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QFD
Leverage Quality Function Deployment (QFD)
Do your Suppliers Deliver
on:
What Customers consider
Important?
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13.
Leverage Quality Function Deployment (QFD)
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QFD
Design for X includes:
Design for Cost
Design for Ease of Use
Design for Ease of Repair
Design for Ease of Sourcing
Design for Ease of Manufacture and Assembly
Design for Green and Ecological Compliance
Design for Shipping
Design for Picking and Packing
Design for Reliability

14.
Leverage 10 Phase Approach to World Class Sourcing
14Copyright by Next Level Purchasing Association, 2020
Phase V: Bid Preparation
• Determine methodology and strategy and variations thereon
• Develop contract for inclusion in request for proposal
• Optimize tools: standardize where possible, customize where
necessary
• Develop supplier scorecards, involving end users and
stakeholders where practical
Phase VI: Proposal Request
• Minimize variables
• Ensure standardized response format and acknowledgement of
key terms
Phase VII: Proposal Analysis
• Analyze supplier scorecards and identify/rectify any breakdowns in evaluation
method
• Involve end users and stakeholders where applicable
• Determine ability to select special categories of suppliers
• Select desired source or short list
• Conduct final acceptance tests/supplier visits/reference checking/vendor
qualification, etc.
Phase VIII: Contracting
• Engage in time-bound negotiation
• Focus on minimizing further analysis burden
• Secure any required approvals for changes to contract language
• Execute contract

15.
Leverage 10 Phase Approach to World Class Sourcing
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Phase IX: Determine Success of Sourcing Process
• Compare results with goals
• Celebrate and broadcast achievement
• Document key success factors and lessons learned
Phase X: Performance Measurement/Supplier Management
• Record key performance metrics
• Initiate corrective action where necessary
• Recognize outstanding supplier performance
• Identify process improvements and value analysis opportunities

16.
Polling Question 2
Which of these is most interesting/useful?
• Phase I: Objective Definition
• Phase II: Current Business Analysis
• Phase III: Requirement Determination
• Phase IV: Market Survey
• Phase V: Bid Preparation
• Phase VI: Proposal Request
• Phase VII: Proposal Analysis
• Phase VIII: Contracting
• Phase IX: Determine Success of Sourcing Process
• Phase X: Performance Measurement/Supplier Management
16Copyright by Next Level Purchasing Association, 2020

17.
Leverage Annual Strategic Procurement Plan
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DEFINITION: A structured document illustrating a well thought out approach to
optimally purchase various categories of products and services.
Customer Requirements
Forecast
Market Analysis
Approach
Resources
Historical Spend
Techniques
Future Spend
Executive Summary
Savings $$$
AnnualStrategicProcurementPlanSystem
ASPPS

18.
Leverage Annual Strategic Procurement Plan
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Forecast System: A projection of demand for each of the various categories of products and services (referred to as
“commodities”)
 Market Analysis System: An assessment of the market for each commodity
 Approach: The method used for procuring each commodity
 Resources: The human and other resources required to successfully procure each commodity
 Historical Spend: A summary of previous years’ expenses for procuring each commodity
 Techniques: The various techniques used to reduce costs for each commodity
 Savings: The estimated savings for each commodity, achieved by applying the aforementioned cost reduction techniques
 Future Spend: A summary of forecasted spend on each commodity, taking into consideration changes in volume and pricing
to be realized as a result of market forces and the application of cost reduction techniques
 Executive Summary: A summary of all aspects of the buying plan for each commodity
ASPPS

19.
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Leveraging SCOR Metrics
Attributes of Performance Operational Definitions Level-1 Strategic Metrics
Responsiveness The speed at which tasks are performed (RS.1.1) Order Fulfillment Cycle Time
Reliability The ability to perform tasks as required (RL.1.1) Perfect Order Fulfillment
(AG.1.1) Upside Supply Chain Flexibility
(AG.1.2) Upside Supply Chain Adaptability
(AG.1.3) Downside Supply Chain Adaptability
(AG.1.4) Overall Value at Risk
Cost-Effectiveness The cost of operating the process (CO.1.1) Total Cost to Serve
(AM.1.1) Cash-to-Cash Cycle Time
(AM.1.2) Return on Supply Chain Fixed Assets
(AM.1.3) Return on Working Capital
(EI. 1.1) Miles traveled in Supply Chain Activities
(EI. 1.2) Eco-friendly raw materials
(EI. 1.3) Index of Supplier Environmental Sustainability
* (EI. 1.31) Energy Consumption
* (EI. 1.32) Carbon Footprint
* (EI. 1.33) Water Footprint
* (EI. 1.34) Savings Levels resulting from Conservation & Improvement Efforts
* (EI1.35) Rate of Waste Reduction
* (EI1.36) Rate of Waste Recycling
* (EI1.37) Rate of Product Recycling
OperationsFinancialEnvironmental
Asset Management Efficiency The ability to efficiently utilize assets.
The ability to perform operations with the
least possible impact to the environment
Environmental Impact
Agility The ability to respond to external influences

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Leverage Systems Thinking SPOT (Change Management)

21.
Final Polling Question #3
Which of these are the most interesting competencies you will
like to learn more about?
• Articulating a Shared Vision around Customer and Business Requirements
• Improving Procurement Processes, Technology, Machines, Materials
• Ensuring the Right People are available and aligned to Vision
• Ensuring the Right Skills are available: Leverage NLPA’s PASS Program
• Ensuring Respect, Appreciation, and Effective Compensation
• Ensuring Ergonomic and Efficient Workspaces: Leverage 5S, Visual Workplace, Kanban
• Ensuring Selection of the Right, Balanced Metrics: Balance Score Card, SCOR Metrics
• Ensuring Accountability for Procurement Function Mandates
• Effectively managing Risks and Unintended Consequences
• Creating a Culture of Innovation and Collaboration
21Copyright by Next Level Purchasing Association, 2020

22.
Copyright by Next Level Purchasing Association, 2020
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23.
You We Learned:
Understand NLPA’s 10 Phase Approach for World Class Sourcing
Understand how to leverage Customer Requirements
 In developing your Procurement Strategy
 Realize Enhanced Customer Experience
Prioritize your future learning
23Copyright by Next Level Purchasing Association, 2020