[Commodity Name] Commodity Strategy [Name] [Date]
Highlights – [Commodity] • Scope: • Key Stakeholders: • Key Commodity Team Members: • Total Spend: • Target Savings: • Current Status:
Commodity Strategy Summary – [Commodity] Scope: !!!! Current Spend : £!!!m Estimated Savings : !!% – !!%
Strategy Recommendations for [Commodity] Recommendations Potential Benefit • xxx • xxx
Stakeholder map for [Commodity] • List names and contact details of all stakeholders relevant to this commodity
Commodity Team Charter Objective Deliverables Who to involve NB: Initial list. More may emerge Scope Critical Success Factors • What will the commodity be responsible in delivering • Commodity Team Members plus others that may need to be involved when appropriate • What are the Commodity Team objectives • xxxx Out of Scope Interdependencies
Characteristics of [Commodity] • Scope the commodity to be covered i.e. what is included in this commodity group?, commodity characteristics, breakdown into sub-commodities, which products under which sub-commodity
Business Need and Functional Requirements What are our Requirements? Where we are… Where we want to be • What does the product do?, Standard vs customised, Level of customisation, Quality requirements, Real vs perceived function, Service requirements, User perception, Value to end customer, Specific specifications • xxx XXXXXX
Spend Distribution • In scope Spend Distribution broken down by Dept/Service Area/Health Board, Supplier, by Sub Commodities
Future Expenditure Trends • Demand Profile
Graphs – Double Click on the Graphs to bring up an Excel imbedded table and modify accordingly Title for Column Graph (Units) Title for Bar Graph (Units) Title for Line Graph (Units) Title for Combination Graph (Units) Column Chart Axis Line Chart Axis Line 1 Line 2 Line 3 Note: Reduce size of numerals on charts after sizing art to fit page.
Graphs 2 – Double Click on the Graphs to bring up an Excel imbedded table and modify accordingly Title for Pie Charta (Units) Title for Floating Graph (Units) Other Slice 1 Slice 3 Slice 2 Title for Bubble Graph (Units) Bubble 4 Useful information for plotting bubble charts Label X Axis Y Axis Bubble 3 Bubble 2 Size of Ball Bubble 1 Label a. Pie charts start at 12.00 and build clockwise from largest to smallest (dark to light); “other” is always last no matter how big.
Graphs 3 Title for Column Graph—Six Colours (Units)
Graphs 4 Title for Stacked Graph—Six Coloursa (Units) 27.0 25.5 Label 6 0.9 Label 5 0.6 1.3 1.1 Label 4 21.6 0.5 1.0 Label 3 Label 2 Label 1 a. Progress shades from dark at bottom up to light at top.
Use these sources of Information (Delete Slide Information Only) Selected Sources of Market Data More Sources of Information
Supply Market Overview • Market Trends - What is happening in the market for the commodity?, Current and future technologies, Changing customer demands New players, mergers and acquisition • Supply Market Share - Key players within the industry, Identify size in terms of turnover, sales, number of customers and capacity
SWOT analysis of the [Commodity] market Strengths Weaknesses • xxx • xxx • xxx • xxx Opportunities Threats • Xxx • xxx • xxx • xxx
Current Suppliers of [Commodity] Current suppliers of [Commodity Name] Supplier [Your organisation] Spend Total Revenue Background on the Supplier xxx • xxx • xxx • xxx xxx • xxx • xxx • xxx xxx • xxx • xxx • xxx xxx • xxx • xxx • xxx xxx • xxx • xxx • xxx
LOW HIGH MEDIUM Porters 5 Forces Analysis [Commodity] Threat of New Entrants Using the comments as a guideline and using market intelligence sources, develop a 5 forces view of the commodity market • How profitable is the product manufactured by the supplier’s market segment? • How complex is the product specification? • What is the product time to market? • Are there patents / design ownership? • Other? Bargaining Power of Suppliers Intensity of rivalry among competitors Bargaining Power of Buyers • How stable is the Tier 2 supplier of the key products? • What is the supply base (#)? • What % of total spend do they control? • Where does the supplier stand in the industry? • What are the supplier’s competitors doing in terms of delivery? • How are competitors performing in terms of innovation? • What proportion of the supplier’s total purchases goes into the product/service? • How critical is the bought out commodity to the customer’s level of satisfaction? • Is customer pressure requiring the way business is conducted to change? Pressure from Substitutes • Are there other products available to serve the same purpose? • How variable is the demand? • How specialised is the demand? • How complicated is the specification? • How specialised is the product function?
The current and future state relationship between [your organisation] & the supplier for [Commodity]… Current State Possible Future State [Your organisation] PERSPECTIVE LEVERAGE STRATEGIC LEVERAGE STRATEGIC • Use competitive advantage to reduce total costs • Use enterprise-wide sourcing volumes as a negotiation tool • Ensure long term availability of supply • Focus on relationship building and process integration with supplier • Use competitive advantage to reduce total costs • Use enterprise-wide sourcing volumes as a negotiation tool • Ensure long term availability of supply • Focus on relationship building and process integration with supplier Business Impact High Business Impact High ROUTINE BOTTLENECK ROUTINE BOTTLENECK • Simplify and streamline acquisition process to achieve efficiencies / cost reduction • Reduce number of suppliers and simplify sourcing process • Simplify and streamline acquisition process to achieve efficiencies / cost reduction • Reduce number of suppliers and simplify sourcing process • Reduce/eliminate company’s risk and exposure to price increases/supply disruption • Secure existing sources of supply and search for possible substitutes • Reduce/eliminate company’s risk and exposure to price increases/supply disruption • Secure existing sources of supply and search for possible substitutes Market Challenge High Market Challenge High SUPPLIER PERSPECTIVE DEVELOPMENT CORE DEVELOPMENT CORE • Defend vigorously expand if possible • Potential long term relationship • Defend vigorously expand if possible • Potential long term relationship • Nurture & Expand Business • Seek opportunities • Develop Business together • Nurture & Expand Business • Seek opportunities • Develop Business together Account attractiveness High NUISANCE EXPLOITABLE NUISANCE EXPLOITABLE Account attractiveness High • Give low attention • Lose without pain • Change supplier • Raise attractiveness • Exploit commercially • Risk losing • High Risk • Give low attention • Lose without pain • Change supplier • Raise attractiveness • Exploit commercially • Risk losing • High Risk Relative Value of Business Relative Value of Business
Our Organisation’s Perspective on Supplier Relationship Objectives for [Commodity] xxxx Characteristics Opportunities moving towards xxxx • xxxx • xxxx These opportunities will lead to result in xxxx
Supplier Perspective on Relationship Objectives for [Commodity] (What does it mean for the supplier Core Characteristics Opportunities moving towards Development • xxx • xxx
Total Cost Model [Commodity] • List the activities carried out under each step of the product life cycle, Determine the impact of each step on the total cost of ownership in terms of High, Medium or Low, Brainstorm the cost drivers associated with the activities under each step, Determine the opportunities in each area. Which costs can be reduced (savings)/avoided (cost avoidance)?, Identify Low, Medium and High Savings Opportunities, Identify the barriers and enablers related to realising the opportunities
[Commodity] typical cost breakdown Recommendations Profit 10% Complete the breakdown for the commodity • What are the recommendations xxxx
Strategic Positioning of Sub-Commodities Using blue circles, place the sub-commodities within the matrix using the comments as a guideline
Sourcing Opportunities for [Commodity] • Develop strong relationships with preferred suppliers • Introduce supplier development programmes • Review / establish service level agreements • Establish incentivised contracts • PPI/PPP contracts • Detailed specifications • Lower cost specification • Optimal service level • Quantify spend volumes • Common specification • Leverage across departments • Collaboration with other public sector bodies (eg.other local government, health care) • Implement framework agreements • Price / performance benchmarking • Value for Money – cost vs benefits • Reverse Auction • Cost breakdown analysis • BAFO tendering • Find alternative ways of meeting needs • Business case to include estimated savings • Eliminate need • Policy changes • Reduce maverick spend • Competitive tendering using S-CAT, G-CAT and L-CAT • OGC contracts • Tender requirements for all spend • Open book contracts • Supplier consolidation – framework contracts • Re-engineer processes • Outsourcing • Reduce inspection • Reduce stock holding • Rationalise requirements and suppliers • Low value ordering systems (e.g. GPC) • e-Procurement • Consolidate invoices • Design / development • Integrate logistics • Frameworks to remove need for OJEU process
Risk Analysis for [Commodity] Risk Analysis Description of Risk Probability of Risk Implications to our Organisation Measures to Minimise / Eradicate Risk • xxxx • xxx • High / Medium / Low • xxxx • xxxx • xxxx • xxx • xxxx • xxxx • xxxx • xxx • High
Post Tender Clarification Plan [Commodity][Supplier] Date The Objective (We need to clarify with [Supplier] to achieve the following) • xx • xx • xx • xx Specific Goals Target decision-maker: • Confirm who will be attending from the supplier side and determine who will be the decision maker Relationship background: • Collate internal intelligence on previous [your organisation] dealings with this person and assess the type of relationship he/she holds with [your organisation] High expectations (Most Desirable Outcome – MDO): • Refer to the components of your objective statement and determine your highest expectation from the supplier i.e. what do you expect them to offer against each objective Supplier High Expectation (MDO): • Collate internal intelligence on previous [your organisation] dealings with this person and assess the type of relationship he/she holds with [your organisation]
Post Tender Clarification [Commodity][Supplier] Date Interests [ your organisation]: • What are your ultimate interests?, Determine which areas you need to ensure and are not prepared to compromise and vice versa e.g. No compromise on delivery or quality to secure pricing. [Supplier]: • What are the suppliers’ interests? Refer to the external and internal data collated above and determine what the suppliers’ interests might be e.g. To maintain price but offer other non-price incentives or to amend payment terms
Post Tender Clarification [Commodity] (Supplier] Date Leverage Favours • Me • Them • About Even • (Who has the most to lose from a ‘no deal’) Strategies / Leverage Least Acceptable Agreement (LAA): • The Least Acceptable Agreement (LAA) is the buyer’s bottom line. Barring the emergence of a better option, settling for anything less than this is not a viable business proposition. This is the minimum the buyer can agree to without sacrificing our impairing interests. The buyer should never agree to any solution less than the LAA without very careful consideration of the BATNA [Supplier] LAA: • xxx • xxx Best Alternative to a Negotiated Agreement (BATNA): • The Best Alternative to a Negotiated Agreement (BATNA) is the buyer’s contingency plan if the supplier is not willing to agree, at a minimum, to the LAA. What are the alternatives in the event of a deadlock or unsuccessful agreement [Supplier] BATNA: • xxx • xxx Can I improve this? • Steps to improve alternatives Can I effect their alternatives of make their status quo worse?
Post Tender Clarification [Commodity][Supplier] Date Possible Proposals (Tradable Variables) Develop a list of ‘give and takes’ or tradable variables, build on shared interests, bridge conflicting interests. • xx • xx • xx Authoritative Standards and Norms Mine Theirs Counter Argument • Xx • Xx • xx • Xx • Xx • xx • Xx • Xx • xx Third Party Moves Can I use a third party: As Leverage, As an Excuse, As an Audience, As a Coalition partner • xx • xx
Post Tender Clarification [Commodity][Supplier] Date Situation and Strategy Analysis As you see it As they see it • Transaction • Relationship • Balanced Concerns • Tacit Coordination • Transaction • Relationship • Balanced Concerns • Tacit Coordination Style Adjustments Their Expected Strategy • My basic style is ________________, so I need to be more ___________ in this situation • Competitive • Problem Solving • Compromise • Avoiding • Accommodating Overall Positioning Theme • Develop an overall positioning statement for the negotiation e.g. ‘This is an opportunity for Supplier A to win the business. The requested pricing has been offered by other suppliers, so we believe it to be possible.’
Implementation Plan Date
Implementation Plan • Include: • Savings Profile by Dept/Service Area/Health Board • Trialling process if applicable • SAP Communication Pack • Buyers Guide • Commodity Action Report (CAR) • ePS Bulletin