Top Tips for Setting Your Scope

Information about Top Tips for Setting Your Scope

Published on August 9, 2014

Author: peterjomeiz



PowerPoint Presentation: P r o c u re m e nt M att er s A serie s o n effectiv e Procuremen t fo r Professional s Par t 1 : Ho w t o se t th e scop e o f you r sourcin g strateg y Here is an example of what I mean... Suppose you are going to market for a cleaning contract to service a number of offices. You will get a price which may, or may not, be better than the one you are currently paying. If you add to the scope other facilities related services such as gardening, security or maintenance then you are increasing the value of the contract and so your leverage in the marketplace ... but this may have to be balanced by the fact that you may be potentially reducing the number of capable suppliers. But how about going further? You may decide that you want to outsource the whole of your property management – or even sell and lease back your property portfolio. This will dramatically increase the value of the contract and take you into a different league of potential cost savings but will also increase the complexity of the procurement and the range and number of stakeholders who need to be involved, adding significant time that is needed to arrive at a solution that is acceptable to everyone. Even if you decide that this is the scope that you want, there may be another alternative that adds even more value. How about selling off your property portfolio and buying in a service in which the supplier provides a defined office space per person together with everything that person needs to perform their job – heating, lighting, furniture, telephone, computer and so on. All at a cost per person but with the requirement that you may want to flex this up or down over time depending on your business needs. The onus is on the supplier to The scope of your sourcing strategy determines what you can and can’t consider when creating your sourcing strategy. The scope (along with the business requirements we cover in the next section) is probably the most important part of what you do in preparing a sourcing strategy. Get this wrong and the possibility of achieving a breakthrough result (one which delivers cost reductions of 15%, 20%, 30% or even more and one which delivers improved service quality and innovation) will be greatly reduced. The starting point is to decide how to define the category of what you are sourcing. PowerPoint Presentation: sell surplus capacity in the office building. This changes a fixed cost to a variable cost so that your costs are more closely aligned with your needs. Eliminating the waste that comes with having excess office space can yield dramatic results. As well as potentially reducing all of the associated costs such as furniture if the supplier can bundle your requirements with those of other clients and go to market with a bigger volume than you can on your own. Other questions you can ask in order to define the scope of the strategy include the following. Are there any geographical boundaries that need to be considered? This may be the result of supply market capabilities (for example, the technology you need is not available in certain parts of the world) or because of your sustainable procurement strategy (for example, not to buy from areas that have a reputation for employing child labour). What time period should the strategy cover? For example, if the supplier will need to make an invest- ment in equipment in order to fulfil the contract, the time period will need to be long enough for them to recover that investment cost and still achieve your price target. Are there any organisation- al boundaries that you need to consider? For ex- ample, part of the scope that you are considering may already be covered by a collaborative agreement with other organisations and you are contractually bound to honour this. The output from this process of defining the scope should be a simple statement of no more than one or two sentences. Here are some examples:- All residential care homes in the county; or IT maintenance that in- cludes all laptops, printers and multi-functional devices; or All grades of boron, carbon and high strength steels for manufacturing plants in Eu- rope. What this cleaning contract example shows is that by considering the capability that you are sourcing instead of the narrow product or service definition, you can generate options that substantially increase the value of the category. In the example, we did this by thinking about the capability as being the management of the working environment. This led us from a very narrowly defined service (cleaning) to produce options that include outsourcing the management of your property portfolio. The result is more options for creating a breakthrough in your cost reduction plans. W ant more T op Tips? Then download my free booklet “57 Top Tips for Sourcing Strategies” by going to ...

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