Strategic Sourcing
Introduction
• Fiscal Challenge for current year and beyond requires cost
reductions
• Strategic Sourcing –Sustaining New Synergies Task Force
Initiative
• Purdue engaged Huron Consulting Group to conduct an
overall assessment of procurement to pay operations and to
help Purdue develop a Strategic Sourcing Master Plan
• Implemented new organizational structure
Strategic Sourcing
Strategic Sourcing Overview
Carol Conner, Business Process Manager
Denny Feldman, Manager, Strategic Sourcing
Strategic Sourcing
What is Strategic Sourcing?
Strategic sourcing is a procurement process
that continuously improves and reevaluates the purchasing activities of an
organization.
Strategic Sourcing
Strategic Sourcing Primary Objectives
– Reduce the costs of goods and services
– Capture resulting savings
– Create contractual alliances with suppliers to
support the long-term goals of the University
– Maintain and improve product quality
– Improve business functions
– Optimize the total purchasing process
Strategic Sourcing
In-Scope: Purchases that are expected to be made in
competitive markets where multiple vendors are
present or negotiable purchasing opportunities exist
for the University.
The Strategic Sourcing Master Plan identified 22
different in-scope commodities with a total annual
spend of approximately $172 million in FY 09-10.
Out-of-Scope: Insurance and benefits, travel and
employee travel expense reimbursement, sponsored
research subcontracts, utilities (excluding data and
voice), and construction.
Strategic Sourcing
Potential Savings from Strategic Sourcing
Spend Commodity
Spend
Quick Wins (Sourceable Spend) $14.0 M
Additional Sourceable Spend $166.0 M
Spend Excluded from Scope $245.0 M
TOTAL $434.0 M
Short-Term Short-Term
Long-Term
Long-Term
FY 2011-13
%
Beyond FY 2013
%
$2.4 - $4.0 M 17% - 29%
$2.4 - $4.0 M
17% - 29%
N/A
N/A
$4.6 - $9.0 M
3% - 5%
N/A
N/A
$7.4 - $17.0 M
3% - 7%
$2.4 - $4.0 M
N/A
$14.4 - $30.0 M
3% - 7%
Includes all funding sources, such as general funds, gifts, sponsored programs, and auxiliary.
Source: Huron Consulting Group
Strategic Sourcing
Approach for prioritizing commodities or categories within
a commodity
Strategic Sourcing
Strategic
Sourcing
Master
Plan
Strategic
Sourcing
Master
Plan
FY 2009-10
Category Savings
Opportunity
and Implementation
Complexity
FY 09-10
Commodity
Savings
Opportunity
and Implementation
Complexity
Highest Priority Areas
High
ORP
$4,624K
Medium Priority Areas
Savings Opportunity
Lowest Priority Areas
IT Hardware
$15,347K
Office
Equipt.
$4,298K
SCI SUPPLIES &
EQUIPT.
$27,538K
MRO
$12,530K
Telecom
$5,350K
Total $172M
FY 09-10 annual
spend for 22
commodities
Printing Svcs.
$2,792K
Med Prod
& Svcs.
$8,477K
Courier
$2,682K
Food
$15,085K
Furniture
$5,156K
Staffing Svcs.
$755K
Fleet
$2,333K
Books
$11,938K
Linens &
Apparel
$994K
IT Software
$ Svcs.
$13,969K
Low
Low
Facilities Equipt.
$4,762K
Degree of Difficulty
Facilities
Svcs.
$15,870K
Retail
$97K
Admin
Svcs.
$1,959K
Prof. Svcs.
$14,540K
Real Estate
$1,439K
High
Strategic Sourcing
Initial Quick Win Categories
• IT Peripherals
– Removal of CDWG catalog
– Goal to reduce/eliminate spending via newegg.com,
amazon.com, Best Buy, etc. which represents
$1.3M of $4.3M total annual spend.
• Desktop/Laptop
– Dell and HP agreements; leveraged entire campus
• Custodial Supplies
– HP Products, Kimberly Clark
– Free shipping
Strategic Sourcing
Initial Quick Win Categories (cont.)
• Office Related Products
– Deeper discount and broader discount base
• Copiers and Printer
– Analysis showed 10 different manufacturers with
over 150 different models on campus
– 350 machines leased/rented; lease rate range 14%
to 24%.
– Internal loan
– Right Sizing
Strategic Sourcing
Additional Executed Categories and Annual
Spend
• Computer Hardware Server Maintenance – $284K
– Changed vendor; leveraged entire campus
• Janitorial Supplies (Trash bags) – $290K
– Showcase Supplier identified in BOILERMART
• Renegotiated Cannon IV agreement for ITaP and
Libraries labs – $645K
– Benchmark data used to renegotiate 40% savings
Strategic Sourcing
Current Category Initiatives and Annual Spend
• Computer Hardware Server (Purchase) – $4.5M
• Cylinder Gasses – $374K
• Audio Visual – $1.5M
• Plumbing – $2M
• Electrical – $1.8M
• Renegotiating HP Janitorial Supplies Agreement –
$640K
• Scientific Supplies – $7.7M
• Outside Printing Services – $2.8M
• Medical Products and Services – $8.5M
Strategic Sourcing
Seven Steps of Strategic Sourcing
1. Analysis
2. Develop Commodity Team
3. Sourcing Strategy
4. Identify & Prequalify Suppliers
5. Supplier Selection & Contracting
6. Integrate Suppliers
7. Monitor & Follow-Up
Strategic Sourcing
Strategic Sourcing 2011 Operating Plan
Commodity
Commodity
Specialist
Medical Products &
Services
Noah
Office Related
Products
Noah
Printing - external
Bradley
2011 Q1
Develop
Analysis Commodity
Team
Scientific Supplies
Bradley &
Analysis
Kelly
Maintenance,
Repair, Operations
Mayes &
Noah
Analysis
IT Hardware
Smith
Analysis
IT Software &
Services
Smith
Office Equipment
Smith
Analysis
Telecommunications
Smith
Analysis
2011 Q2
Sourcing Strategy
Identify &
Prequalify
Suppliers
2011 Q3
Supplier Selection &
Contracting
2011 Q4
Integrate Monitor &
Suppliers Followup
Develop
Identify &
Supplier Selection & Integrate Monitor &
Sourcing
Analysis Commodity
Prequalify
Contracting
Strategy
Suppliers Followup
Team
Suppliers
Develop
Identify &
Supplier Selection &
Analysis Commodity
Sourcing Strategy
Prequalify
Contracting
Team
Suppliers
Develop
Identify &
Supplier Selection & Integrate Monitor &
Sourcing
Commodity
Prequalify
Contracting
Strategy
Suppliers Followup
Team
Suppliers
Develop
Identify & Prequalify
Integrate
Commodity
Sourcing Strategy
Supplier Selection & Contracting
Suppliers
Suppliers
Team
Develop
Identify &
Supplier Selection & Integrate Monitor &
Commodity
Sourcing Strategy
Prequalify
Contracting
Suppliers Followup
Team
Suppliers
Develop
Identify &
Supplier Selection & Integrate
Analysis Commodity
Sourcing Strategy
Prequalify
Contracting
Suppliers
Team
Suppliers
Develop
Identify &
Supplier Selection & Integrate Monitor &
Commodity
Sourcing Strategy
Prequalify
Contracting
Suppliers Followup
Team
Suppliers
Develop
Identify &
Supplier Selection & Integrate Monitor &
Commodity
Sourcing Strategy
Prequalify
Contracting
Suppliers Followup
Team
Suppliers
Integrate Monitor &
Suppliers Followup
Monitor &
Followup
Monitor &
Followup
Strategic Sourcing
Visit web site for commodity updates:
www.purdue.edu/purchasing/Sourcing
For more information or to schedule a unit
meeting contact:
Denny Feldman, Manager, Strategic Sourcing
Email: dkfeldman@purdue.edu
Phone: 765 49-41856
Strategic Sourcing
Path Forward
• Procurement Organization
• Commodity Groups
• Procurement Council
• Your Role