Guidance Document
Source Plans
Source Plans
Guidance Document
Version 1.0 – June 2011
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Guidance Document
Source Plans
Source Plans
What is a Source Plan?
A Source Plan is the business plan for implementing the changes identified in the Strategic
Sourcing process. It is a systematic approach to planning the way forward on areas of
major spend, and should directly link to the overall sourcing strategy.
1.1
Which part of the Category Management process does it support?
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1.2
Generating a Strategy
What is included in this guide?

What is a Source Plan?

When do a Source Plan?

Benefits of a Source Plan

Source Plan Contents

Outline for Source Plans

Source Plan Example (Cleaning Services)
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What is a Source Plan?
A Source Plan:
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Records data and both quantitative and qualitative analyses supporting the
recommended strategic sourcing approach for a given time horizon.
Outlines an action plan to create change.
Is a vehicle for gaining management commitment and support.
Records key ongoing activities associated with implementation of the sourcing strategy
such as supplier/sourcing selection, benefits realized, continuous improvement
activities, etc.
When to do a Source Plan?
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Source plans are a recommended output of the Category Management process for
major sourcing groups and their related categories.
At management’s discretion, source plans are not required for one-off projects or more
tactical “Just Do It” initiatives.
Preparation of a source plan should commence as soon as possible after the Category
Manager process has begun.
Source plans should be reviewed and revised as continuous improvement activities or
internal/external events take place that may have an impact.
Source plans should have a date to prompt the review of validity of the strategy.
Benefits of Source Plans
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Record a team’s analyses, recommendations, plans and benefits and ongoing
activities associated with the category.
Enable senior management and stakeholder review, and capture of approvals where
appropriate.
Provide future reference for colleagues, senior management, and business partners.
Provide a framework for implementing breakthrough procurement strategies.
Can be used to enlist the support of business sponsors and stakeholders in the
change management and improvement process.
Provide a framework for directing a buyer’s thinking toward longer-term strategic
solutions.
Source Plan Contents
The goal of a Source Plan is to present a strategy and a plan of action as a compelling
business case for change. A Source Plan must have enough information for the reader to
understand what strategy has been recommended, why it has been chosen, and how it will be
implemented; post approval, it should be kept up to date with relevant information on the
status of the plan, spend, actual benefits delivered, continuous improvement and supplier
relationship management activities, etc.
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Outline for Source Plans
All source plans should broadly follow the guideline below in terms of contents. As general
guidance, source plans should range between 1 and 15 pages in length; this will depend on
the category itself, classification of the category (e.g. Just Do It vs. Joint Strategic Sourcing),
management preference, etc.
It remains the Category Managers and sourcing team’s discretion as to what Category
Management templates are used throughout the sourcing process. Templates that are used
should be referenced in the source plan (as appropriate). For clarification, Category
Management templates do not have to be embedded in the actual source plan document to
keep the length of the narrative to a minimum.
The recommended Source Plan contents are shown below. Note that use of these headings
and flow is for guidance purposes only; use of non-procurement language for headings (e.g.
Background vs. Launch & Mobilise Team, etc.) is fully appropriate and should be at the
preference of the author given the intended audience. Similarly, use judgement when
referring to Procurement templates and tools, etc. to avoid language that may not be
understood by the business.
Launch & Mobilise Team (or e.g. Project Purpose)

Category Description

Current Category Situation and background data
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Team Objectives, Scope, Leadership and Sponsorship
Gather Internal & External Data (or e.g. Background)
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Key Business Requirements
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Supplier and Supply Market assessment
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Spend history
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High level overview of major contracts in place and assessment of any
implications/issues
Analyse Data & Generate Options (or e.g. Analyse and Options)
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Summarise key relevant analyses and their implications for the strategy providing
reference to related templates, documents or spreadsheets
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Identify/list options generated providing reference to the Options Generation
template
Develop & Approve Strategy ( or e.g. Strategy Summary)
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Identify the strategy chosen and explain why including:
– key assumptions
– summary description of change
– quick wins planned and actioned
– summary of anticipated benefit projections for current and outer years
(and comparison with business requirements)
– required relationship changes
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– resources required to ensure effective and timely implementation of
the strategy
Note: the above form the foundation for the requisite information needed for Procurement
Management approval of the sourcing strategy, which should be done at this time if
required
Plan and Implement Strategy (or e.g. Strategy Implementation Planning)
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Next Steps short term (what is needed to kick start the implementation)
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Negotiation and implementation plan (including resource requirements)
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Key milestones and timings
Management & Maintain Strategic Performance (or e.g. Continuous
Improvement or Sourcing Update)
The Manage and Maintain Strategic Performance section of the source plan is to be used to
ensure the source plan is kept up to date with then-current decisions and actions impacting
the plan, actual results stemming from implementation of the plan, and as a means for
ensuring a checkpoint for when the plan should be fully reviewed for applicability / a new plan
and strategy generated. Contents may include:
 Plan for on-going Supplier Relationship Management and any associated key
outcomes there from
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Actual benefits delivered
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Plan review and update timelines
Content Guide
When writing your source plan, use the guide below to help in considering relevant topics and
their applicability to your sourcing strategy:
Topic
1.
Strategy summary
2.
Long term strategy
3.
Business requirements
4.
Sourcing history
5.
6.
Price and cost history
Market analysis
7.
Supply analysis
8.
Technical developments
9.
Portfolio Analysis
10. Vulnerability Analysis
11. Sourcing objectives
12. Linkage
13. Cost reduction
programme
14. Implementation plan
15. Competitive advantage
Should Address
Is there a crisp, persuasive and comprehensive summary of the future sourcing
strategy?
Does this strategy mesh in with broader purchasing and business strategy and
objectives?
Are they clearly stated and is there evidence of cross-functional collaboration to
secure agreement on these requirements?
Does the summary of past sourcing history indicate its rationale and principal
features?
Are past pricing trends fully analysed in terms of the underlying cost drivers?
Is there a clear and perceptive review of likely business developments within the
supply market place?
Has an analysis been done of current and potential supplier performance and
capability?
Is there any analysis of likely technical innovations, developments and trends
affecting supply?
Is there an explanation of current and preferred positioning of the commodity, item
or service in Portfolio Analysis terms?
Is there evidence of an analysis of potential vulnerability, together with plans to
minimise risk to acceptable levels?
Are sourcing objectives in both cost and value terms, detailed in a comprehensive
and balanced manner?
Does the source plan flow from the systematic review of 2-11 above?
Are the opportunities for improvement quantified in cost reduction and cost
containment terms?
Are accountabilities, responsibilities, tasks and milestone dates fully detailed?
Has appropriate resource been allocated to ensure an effective implementation?
What competitive advantage will the implementation of this plan bring?
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Note: the contents and subject matter in this source plan are fictitious and is intended for
illustrative purposes only regarding proposed source plan contents, flow, etc.
Source Plan for Cleaning Services
Scope: all UK sites
Source Plan Owner: John Doe
Date: Nov 2009
Overview and Scope
This is a Collaborative Fast Track source plan for cleaning services provided to Fred Foods facilities in
the UK. Services include, but are not limited to, carpet maintenance, office waste removal, dusting,
bathroom cleansing and supplies provisioning, along with other light maintenance activities such as air
filter and light bulb replacement, etc. This plan relates to all UK facilities across all business units and
is sponsored by Jane Smith, Head of Facilities.
Fred Foods sites have historically used a number of different outsourced service providers. A sourcing
exercise was initiated primarily because: a) the contracts with Ajax (the Bolton, Oldham and Burnley
supplier) and Cleanstar (the Birmingham supplier) are both expiring in April 2010, b) facilities managers
at all locations are facing budget reduction challenges, and c) the category team’s sponsor, J. Smith,
supports procurements notion that by rationalizing the supply base, re-examining and standardizing
service levels, and leveraging the combined UK spend significant cost reductions and service
improvements can be attained. A sourcing team was formed in June 2009, comprised of the site facility
managers at all UK sites, and was formally launched by J. Smith (note: all site facility managers have
either solid or strong dotted-line accountability into Jane).
Background and Business Requirements
The sourcing team has met bi-weekly since its kick-off meeting and has focused heavily on business
requirements planning and standardization opportunities. Contracts for all sites were reviewed openly
to understand and challenge service offerings and levels, how pricing was based, must vs. nice to
have’s, etc. A review of all site expansion and reduction activities was also conducted to document
known changes in the scope of services. In the end, the team prioritized and ranked the business
requirements and standardized terms of reference for those services generic to all sites. What resulted
was a list of core services that all sites needed to have performed (incl. things like recycling / recycled
supplies, etc.), consistency around those service levels, and a sub-set of site-specific activities that
could be justified based on unique attributes for the site. A pro-forma review of in-sourcing vs. outsourcing was conducted in concert with Finance but was deemed not to be a viable option based on
projected, ongoing costs.
The Fred Foods spend for these services totals £500,000 per annum and this has increased
moderately over the past two (2) years. Ajax and Cleanstar account for roughly 30% of this total.
The contracts with Ajax and Cleanstar were both renegotiated and renewed in December 2005 through
to 30 April 2010, (with an option to extend upon mutual agreement). These agreements contain price
escalation provisions tied to inflation and have liability caps tied to the annual turnover. In Fred Foods
favour, both contain exit assistance language and Fred Foods ability to terminate for convenience
without cause. Fred Foods represents close to 15% of Ajax’s total annual turnover and remains their
largest customer. All other suppliers have been with their associated Fred Foods site for a minimum of
3 years, with prior contract renewals being handled as either a sole source negotiation or, in the case of
the renewals with Enfield and Bristol, via an RFP process that did not involve SAP e-sourcing. All
contracts have language allowing Fred Foods the right to terminate for convenience without penalty
(the farthest notice period is 60 days). Aside from Cleanstar, all incumbent suppliers are regional,
privately-owned companies.
The total UK marketplace for industrial cleaning services is valued at $1.5 billion, spread across some
10,000 different suppliers (public and private). The top 10 suppliers (based on sales) make up roughly
15% of the marketplace; of these, Bowman, Humphries, Cleanstar, Bright and James are considered
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truly national providers and have seen steady growth over the past five (5) years by expanding into new
markets via a combination of local acquisitions and/or new offices. James is a minority owned firm that
has seen revenues growing at a rate of 15% per annum over the last 4 years.
Using this information, the team issued an eRFI to 30 suppliers, which included incumbents, national
providers Fred Foods was not currently utilizing, and strong regional suppliers. Questions were
formulated to cross the gamete of capabilities against the business requirements, geographic scope of
their operations, etc. All questions were pre-weighted by the team and set up to facilitate autoscoring
of the responses. The results of the RFI were analyzed by the team in a special two (2) day workshop
with 12 suppliers being short-listed for further consideration. Supplier visits were conducted, references
checked, and financial evaluations ran with no significant findings through any of these events. Of the
12 suppliers, all but three (3) raised no major objections to Fred Foods’ proposed standard terms and
conditions.
Strategy Creation and Approval
An Options Generation exercise was conducted supported by findings from the RFI to review various
scenarios and ideas on how best to proceed. The team is recommending that a series of bidder’s
conferences be held at selected Fred Foods sites to ensure full understanding of the business
requirements, facility layouts, etc. This would then be followed by a reverse-auction with pricing lots
established for a) each site, b) regional site clusters, and c) a lot for servicing all Fred Foods sites.
Fred Foods will look for a three (3) year term, a 3 year cost reduction rate plan, benchmarking
provisions, termination for convenience, exit assistance and penalty provisions for failure to meet
stipulated service levels.
From all inputs received to date, including historical (prior to establishment of the sourcing team)
unsolicited proposals from suppliers that were never actioned, the team feels confident that a cost
reduction target of 25% to 30% (circa £100,000) is achievable in year 1, with further cost reductions
approaching 5% - 10% in years 2 and 3. The proposed timeline is:

to conduct the bidder forums throughout Dec
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run the eAuction the week of Jan 5th
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down-select and secure approval of the selected supplier(s) by Jan 25th
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conclude final contract negotiations and execute the agreement(s) by mid Feb
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commence contract implementation / transition March (this will include notifications to any nonselected incumbents, contract notification formalities, implementation contingency planning, etc.)
Approval to proceed with implementation of this Sourcing Strategy is requested.
The sections below would be added to the source plan post Procurement approval of the strategy and
used to secure further business-level and procurement approvals, etc.
Strategy Implementation
All bidders conferences were conducted as planned with full participation from each of the 12 suppliers
are all of the sites. The eAuction event was held on April 7th, again with all 12 suppliers participating.
Bid results were analyzed across all lots (per site, per region, all Fred Foods pricing). The sourcing
team met over two consecutive days and is recommending the most cost effective result of the auction,
a UK wide award of all Fred Foods sites to Cleanstar. With this scenario, Fred Foods will reduce
overall operating costs by £160,000 or 40% over current, budget costs in year one. This solution is
seen as being not only the optimal from a cost perspective, but will also result in reduced complexity in
the supply base (9 suppliers down to 1) and enable the focus around continuous improvement.
The planned next steps are for Purchasing and Legal to finalize proposed contractual wording with the
supplier (the supplier agreed to Fred Foods standard terms and conditions with minor modifications
coming out of the eRFI), highlights of which include Fred Foods retaining the right to terminate for
convenience, incorporate performance and penalty provisions, provide contract exist assistance should
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Fred Foods elect to terminate at any point, and agree to a benchmarking clause. Proposed timing is to
start the dialog with Cleanstar and James on or about Feb 20th and secure final contract signatures by
March 20th with transition to the new service to start effective May 1st. Notification to the incumbent
suppliers other than Cleanstar will also be made during this time. Ajax, who supports many of the
North West sites, has been conditioned throughout this process and is contractually obligated to
provide exit assistance / transition support. Given the impact in loosing the business, contingency
planning has been put in place should they not honour those obligations.
Approval to proceed with this sourcing and supplier selection / contract implementation is requested.
The following section can be added post Strategy Implementation / Supplier Selection to keep the
source plan up to date with relevant activities
Continuous Improvement / Source Plan Update – Sept 2010
The first governance and supplier relationship management meetings were held with Cleanstar (5 Sept
in Bolton). The meeting was well attended with the respective facilities representatives from each site,
J. Smith, Purchasing, Finance and senior management from the suppliers. Discussions concentrated
on an after action review of the transition process, supplier performance survey results, each supplier’s
plan for managing attrition of housekeeping staff, a review of contract inception-to-date performance,
and round table discussions on opportunities for continuous improvement. Agenda, meeting outputs
and continuous improvement plans are attached with SAP E-sourcing. The next scheduled meeting is
set for 6 June 2011.
2010 year-end benefits and spend, along with 2011 projected spend have been updated appropriately.
The sourcing team has agreed to fully review this sourcing strategy on or about February 2012.
See also (in E-sourcing): Team Charter, Stakeholder map, Fred Foods Sourcing History, supplier and supply market analysis,
Portfolio Analysis, eSourcing options analysis, Implementation Plan, SRM meeting summary and Performance improvement
Plan.
Note: the contents and subject matter in this source plan are fictitious and is intended for
illustrative purposes only regarding proposed source plan contents, flow, etc.
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