PLEASE NOTE: This document has been included as an example. The format & contents of
your final commodity strategy may vary as per the internal governance, processes and
procedures within your organisation.
«Commodity»
Version 0.0
Proposed Commodity Strategy
«Date»
0
Version control
Version #
Updated By
Date Updated
Change Details
1
Contents
Page/Slide Number
Key Contacts:
«Name»
«Title»
Tel:
Foreword
Executive Summary
Stakeholder Engagement
Commodity Charter
Email:
__________________
Current Situation:
«Name»
- Commodity Profile
- Supply Market Analysis
«Title»
Proposed Strategy:
Tel:
-
Strategic Objectives
Email:
__________________
«Name»
-
Sustainability
-
Supplier and Contract Management
-
Principal Options
«Title»
-
Proposed Approach
-
Selection Criteria
-
Award Criteria
-
Deployment
-
Risk analysis
-
Communication Plan
-
Implementation Plan
Tel:
Email:
Appendices
2
Foreword
Purpose
This document describes the commodity strategy for procuring «Commodity» .
The information within this document will be shared and developed with key stakeholders. It contains certain
sensitive commercial information and should not be shared beyond this environment. In particular this
document should not be shared with suppliers as it discussed several sourcing strategy options and makes
recommendations for implementation.
Approval
Approval of this document will come through the established governance route.
Notes
The data contained in this document is based on data provided from several sources. These include:
 «i.e. data extracted from the Scottish Procurement Information Hub (formally known as Spikes
Cavell Observatory) »;
 «i.e. market information provided by «source»»; and
 «i.e. product and spend data provided by several of the major incumbent «commodity»
providers»
The document takes into account information gathered during «timeframe», including that obtained from
participants in the cross-sector User Intelligence Group held during this time.
3
Executive Summary
The initial insights,
options considered
and recommended
outcomes are based
on careful
consideration of the
total addressable
spend, cashable and
non-cashable benefits.
Key Findings
• Total spend is over £«value»:
«i.e. breakdown of spend by organisation»
• Products purchased make up «No.» key sub-categories:
«i.e. breakdown of spend by sub-categories»;
• More than x-number of suppliers are currently used to provide these products:
«i.e. breakdown by supplier»;
Benchmarking and Opportunities, Options Considered
• Scope and Dependencies
«i.e. Department (s), Organisation (s) or sector( s) interested in proposed outcomes;
• Options XXXXXXXXXXXXXXXXXXXXXXX;
«i.e. xxxxxxxxxxxxxxxx;
Recommendations and Key Actions
• After comprehensive consultation with stakeholders:
«i.e. To go to market on a national, cross-sector basis breakdown by supplier»;
-«i.e. Award new contract/s by «date», with a phased implementation effective from «date»;
Benefits, Justification and projected savings
«i.e. cashable/non-cashable savings»;
«i.e. return on investment»;
Key Risks and Resource Implications
«i.e. Insufficient access to accurate and current spend data and current contract data»;
«i.e. Insufficient stakeholder engagement and demonstrable commitment to required resource».
4
Project Timeline per initiative
An estimated project
plan for the
implementation of
each feasible option
should be included.
«Commodity»
Aug- Oct
2007
Nov-Jan
2007/2008
Feb-Apr 2008
May-Jul 2008
Aug- Oct 2008
Sourcing consolidated contracts
Data Gathering & Strategy
Product level data gathering & analysis
Development of lotting and contract
strategy
Stakeholder workshops/presentations
Confirmation of strategy & approach
Formal customer sign-up
Development of specification & SLA
Development & refinement of core list
Source:
Spikes Cavell
Sourcing consolidated contracts
OJEU Notice Issued
Pre-qualification of suppliers
Tender preparation & management
eAuction
Final selection & validation
Formal contract award
Implementation & Mobilisation
Mobilisation
First customers go live
Mobilisation of additional customers
Key:
In process
Supplier & contract management
Planned
Not agreed
Estimated contract awards: May 08.
5
UIG Membership
Capture details of UIG
members.
Add Commodity Name here
Name
Location
Dept.
Role
Tel.
6
Stakeholder Engagement
stakeholders, across
the organisation
and/or Public Sector,
are consulted in the
refinement and
validation of a number
of aspects of this
commodity sourcing
strategy.
Early engagement of key stakeholders will help to ensure the following benefits:
 The closer alignment of strategy and specification with requirements of users;
 The identification of leading practices already implemented at local level;
 The ability to demonstrate increased buy-in to strategy, enhancing leverage in the supply market; and
 The improved take up of contracts once awarded.
A number of stakeholder workshops are planned for «time frame» :
 Focus on procurement managers within end user organisations
 Sector based approach, reflecting different operating environments and status of current arrangements

Other stakeholders (see below) to be targeted later in the year, this will include developing:
 a standard information pack for users; and
 a standard information pack/messages for suppliers
High
Tender &
Contract
Award
Impact on
success
It is essential that key
Med
Low
Unaware
Awareness
Level of Engagement
Understanding
Support and
Buy-in
Commitment
and Action
Advocacy and
Ownership
7
Current Status of Commodity/Contracts
Provide details of
commodities covered
by the strategy.
1 - Commodity Definition
Commodity
Name
Definition
Source
8
Current Status of Commodity/Contracts
Provide details of
existing contracts.
2 – Current Contracts
Contract
Detail
Contract
Scope
Expiry Date
Current Pricing
9
Current Status of Commodity/Contracts
It is essential that key
stakeholders, across
the organisation
3 – Relevant Policies/ Processes
and/or Public Sector,
are consulted in the
refinement and
validation of a number
of aspects of this
Policy
detail
Reason of impact
Source
commodity sourcing
strategy.
10
Current Situation
11
Spend Analysis
Create your Spend Analysis and add it here. This is an example of one format
Annual Spend
£900,000.00
£800,000.00
£700,000.00
£600,000.00
£500,000.00
Keymed
£400,000.00
Diagmed
£300,000.00
Cook
£200,000.00
Conmed
£100,000.00
Boston
he
t la
nd
S
le
e
en
Ju
bi
Is
le
s
G
ol
d
or
de
rs
B
hl
an
ds
W
es
te
rn
&
es
H
ig
ay
G
al
lo
w
al
le
y
V
D
um
fri
Fo
r th
Ta
ys
id
e
fe
Fi
n
La
na
rk
sh
ir e
A
rg
yl
l&
C
ly
de
Lo
th
ia
Ar
ra
n
&
yr
sh
ire
A
G
ra
m
pi
an
£0.00
G
la
sg
ow
Value
Monmouth
12
Sustainability
The Sustainability Test
Area
will help identify and
Aspects/Considerations
Proposed Actions and
Potential Impact
prioritise the
sustainable aspects
Social
and impacts of your
requirement and
procurement .
Consideration and
actions identified
during strategy
Economic
development should
be reviewed and
monitored throughout
the life of the contract
or framework
agreement.
Environment
13
Commodity Profile
Summarise key
findings.
Product Profile
«product profile details including any relevant
graphs/tables »
Commodity Tree
Commodity
Sub Com 1
Sub Com 3
Sub Com 2
Sub Com 4
Sub Com 5
Sub Com 6
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Segment
Sub Com 8
Sub Com 7
Segment
Segment
Sub Com 9
Sub Com 11
Segment
Examples of Templates
available – See Slide Notes for
details of templates and
guidance
Segment
Segment
Segment
Segment
Segment
Commodity Characteristics Template
Training
Functionality
End User
Requirements
Organisation
Future
Constraints
14
Market Summary Template
Summarise key
findings.
Factor
Findings from research
Market definition
Market Overview
Trade Associations
Key Suppliers
Market growth
Trends and
developments
Supply market trends
15
Supply Market Analysis
Use the Market
Summary Template
to populate the
following:
Market definition
«definition»
Include any relevant graphs/tables i.e. Public sector spend £ by supplier size (%),
Total Scottish market (£) by supplier size «year» (%), total employment in Scotland
by supplier size «year» (%), and a synopsis of the SME market analysis”
SWOT Analysis
Strengths
Market size
«size»
Structure
«structure»
Current supply
«supply»
The format of this slide is an
example only. You may choose
to present different analysis
tools depending on your
requirement.
Weaknesses

Text

Text

Text

Text

Text

Text
Opportunities
Threats

Text

Text

Text

Text

Text

Text
ECONOMIC
Challenges
«challenges»
POLITICAL
SOCIALDEMOGRAPHIC
Competition
«competition»
ETHICAL
PEST LEE
Analysis
TECHNOLOGIC
AL
ENVIRONMENT
AL
LEGAL
16
Supply Market Analysis
Summarise findings
and conclusions e.g.
80% of the market is
with 20% of the
suppliers.
Organisation spend as percentage of supplier turnover in Scotland
The table below shows the annual turnover in Scotland for the top 10 suppliers in the UK and the Public
Sector spend with them.
The total Scottish Public Sector spend on «Commodity» is greater than any one of the suppliers’ current
turnover in Scotland.
Supplier Name
x
x
x
x
x
x
x
x
x
x
Sub-total Spend with Top 10 Suppliers
Annual
Annual
Turnover in Turnover in UK
Scotland £000
£000
Current
Expenditure
£000
Percentage of Percentage
turnover
of turnover
Scotland
UK
xx,xxx
xxx,xxx
xx,xxx
«00»%
«0.0»%
xx,xxx
xxx,xxx
x,xxx
«00»%
«0.0»%
xx,xxx
xxx,xxx
xxx
«00»%
«0.0»%
xx,xxx
x,xxx,xxx
xxx
«00»%
«00»%
xx,xxx
xxx,xxx
x
«00»%
«00»%
xx,xxx
xxx,xxx
x
«00»%
«00»%
xx,xxx
xx,xxx
x
«00»%
«00»%
x,xxx
xxx,xxx
x,xxx
«00»%
«00»%
x,xxx
xxx,xxx
x,xxx
«00»%
«00»%
x,xxx
xxx,xxx
xxx
«00»%
«00»%
xx,xxx
«00»%
xxx,xxx
17
Supplier Profile Analysis
X Supplier is the global leader in the provision of Y solutions
Organization and History
Strategy and Key Market Segments
Products, Service Range and Operations
Key Financials and Other Developments
Insert commodity specific Supplier Data. Use 1 slide for each of the top 5 suppliers.
You should base the top 5 on whether you think the market is global, European, or UK only
18
Supplier Cost Drivers
Cost Element
% of Overall Price
(e.g. Material, Labour, (Use estimates,
Sub-contract,
market, supplier and
Transport,
existing analysis)
Overheads…)
Source of Data
Data Confidence
(Low, Medium, High)
19
Total Cost of Ownership: Considerations
Acquisition
Ownership
Operation
Disposal
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
20
Risk Analysis
Provide details of risks
identified and
assessed.
Mitigation strategies
should be developed
where
possible/appropriate
Risk Identification & Assessment
• The following risks/issues have been identified.
Risk
Description of
Risk
Probability/
Impact Result
Date of
Assessment
Mitigating
Actions
Next review
date
ID
Owner
1
AN Other
Lack of
Stakeholder
Buy-in
M/H
01/01/2010
Ensure clear
comms and
engagement
TBC
2
AN Other
Supplier
performance
failure
L/H
01/01/2010
Contract
Mgmt &
monitoring
01/02/2010
• The following mitigation strategies have been developed & deployed
• xxxxxxxxx
• xxxxxxxxx
• xxxxxxxxx
21
Best Value/Opportunity Analysis
Highlight your priorities
e.g. which proposals
will deliver the most
significant gains.
Best value analysis
Area
Examples of leading practice
Potential/Proposed/Approach to implementation
• Reduce
consumption
•
Eliminate need
•
«approach»
•
Find alternative ways of meeting needs
•
Policy changes
•
Benchmarking usage and consumption across
comparable organisations
• Consolidate
spend
•
Common specification
•
•
Collaboration with other public sector bodies
A key component of this strategy is to consolidate spend
across the Public Sector in Scotland.
• Improve
specification
•
Detailed specifications
•
«approach»
•
Lower cost specification (own brand?)
•
«approach»
•
Optimal service level
•
Quantify spend volumes
•
Value for Money – cost vs benefits
•
Develop strong relationships with key suppliers
•
«approach»
•
Introduce supplier development programmes
•
«approach»
•
Review / establish service level agreements
•
Introduce routine supplier monitoring and
reporting
•
Establish incentivised contracts
•
Price / performance benchmarking
•
«approach»
•
E- Auction
•
«approach»
•
Cost driver analysis
•
Price harmonisation
Co
ns
oli
da
te
Pu
Sp
rc
en
d
Ma has
na e D
ge em
m e an
nt d
• Increase
competition
ture
uc ase
str B
Re pply
Su
Cost
Cash
Quality
Service
Innovation
Sustainability
se n
rea titio
Inc pe
se
m
Ba ent
Co
ly
pp em
Su anag
M
Co Re
ns du
um ce
pti
on
ture s
uc hip
str ns
Re latio
Re
Sp Im p
ec rov
ific e
ati
on
• Re-structure
relationships
Total Cost Management
Optimise Total
Supply Chain Costs
Reduce Total Life cycle
/ Ownership Costs
Reduce / Eliminate
Transactions
22
Best Value Analysis (Cont’d.)
Best value analysis
Area
Example of leading practice
Potential/Proposed/Approach taken in this strategy
• Re-structure
supply base
•
Tender requirements for all spend
•
«approach»
•
Supplier consolidation
•
«approach»
• Reduce /
eliminate
transactions
•
Rationalise suppliers
•
«approach»
•
Rationalise requirements
•
«approach»
•
Low value ordering systems (e.g. GPC)
•
«approach»
•
e-Procurement Scotland / other systems
•
«approach»
•
Consolidate invoices
•
Re-engineer processes
•
«approach»
•
Outsourcing
•
«approach»
•
Reduce inspection/checking
•
Reduce stock holding
•
Reduce/consolidate deliveries
•
Reduce maverick spend
•
Design / development
•
«approach»
•
Integrate logistics
•
Frameworks to reduce for lengthy tender processes
•
Focus on demonstrably sustainable (or reduced
impact) products, services and solutions
•
«approach»
• Reduce total life
cost / cost of
ownership
ture
uc ase
str B
Re pply
Su
Co
ns
oli
da
te
Pu
Sp
rc
en
d
Ma has
na e D
ge em
m e an
nt d
Cost
Cash
Quality
Service
Innovation
Sustainability
se n
rea titio
Inc pe
se
m
Ba ent
Co
ly
pp em
Su anag
M
Co Re
ns du
um ce
pti
on
• Corporate Social
Responsibility
ture s
uc hip
str ns
Re latio
Re
Sp Im p
ec rov
ific e
ati
on
• Optimise Total
Supply Chain
Costs
Total Cost Management
Optimise Total
Supply Chain Costs
Reduce Total Life cycle
/ Ownership Costs
Reduce / Eliminate
Transactions
23
Proposed Strategy
24
Strategic Objectives
The strategy, and the
key options
considered, have been
tested against the
aims of the strategy
and a number of other
important
considerations.
Whilst the proposed
approach represents
the preferred option for
realising these aims a
number of options
were given careful
consideration.
Objectives
Implementation of this category strategy is intended to address «No.» key objectives:
• «i.e. To leverage the £«00»+ million, spent annually, to realise improvements in the value for money
obtained in the sourcing of «Commodity» including reductions in product prices, enhancements to product
quality and improvements in service levels, where appropriate»;
• «i.e. To increase the take up of leading processes and practices across the sector, including increases in
the efficiency of key transactional processes including order, delivery and payment»;
• «i.e. To release valuable ‘local’ and sector procurement resources to enable them to allow them address
other areas of spend, increasing the range and depth of third-party expenditure influenced by procurement
across the public sector»; and
• «i.e. To reduce the negative environmental and social impact of the use of «Commodity».
In striving to achieve these objectives, the strategy will also seek to consider its impact on:
•«i.e. Incumbent and potential SME suppliers»;
•«i.e. The long term competition in the provision of «Commodity» to the public sector in Scotland»;
•«i.e. The need for continuity of service provision between current and proposed contracts»; and
•«i.e. The need for choice and flexibility to be retained in order to address certain, specific needs of individual
end user organisations».
Each of the options considered have been tested against its impact on these objectives and considerations.
25
Principal Options Appraisal
The Authority is
Option 1
Option 2
Option 3
Option 4
committed to
managing, monitoring
Procurement
Route
and developing
Not
applicable
Do nothing
Open
Restricted
Use existing
framework
supplier performance
and understanding
Develop
bespoke
contract
Benefits &
Concerns
whether our contracts
are delivering and
Recommendation
& Justification
1
meeting the needs of
our customers.
OJEU
Procedure
Competitive
Dialogue
Other
Benefits &
Concerns
2
26
Principal Options Appraisal
Option 1
The Authority is
committed to
Lots
managing, monitoring
Option 2
Option 3
Option 4
Not
applicable
1 Lot
Geographical
Product /
Service
Not
applicable
1 Supplier
3–5
Suppliers
5 + Suppliers
Recommendation &
Justification
and developing
Benefits &
Concerns
supplier performance
and understanding
whether our contracts
3
are delivering and
meeting the needs of
our customers.
Suppliers Per
Lot
Benefits &
Concerns
4
27
Proposed Initiatives
The proposed
approach is based on
«xxxx».
Key Principles
The proposed approach to the supply market includes:
•«i.e. A single, national and cross-sector sourcing exercise to commence in «Month/year»»;
•«i.e. Contract(s) to be awarded by «Date» with a phased implementation and first orders being placed from
«Date»;
•«i.e. Contract(s) to cover an initial term of «Years» years with options to extend by a further «Year/s» year/s»;
and
•«i.e. Public sector organisations will be expected to confirm their commitment to using the/these contract(s)
during «Month/year» (regardless of their anticipated migration date)».
More detail on the specific requirements to be addressed with this/these contracts is provided in the Proposed
Statement of Requirements document (which is available separate to this strategy document).
Key Advantages
•«xxxx»;
•«xxxx»;
•«xxxx»;
•«xxxx».
It is anticipated to deliver savings of up to £«0.0» million per annum for the public sector in Scotland
Potential Issues and Risks
•«i.e. Participation by regional SME suppliers may be limited»;
•«i.e. Strategy and sourcing process will need to be carefully explained to stakeholders and suppliers».
28
Appendices
29
Supplier Selection Criteria
Potential suppliers will
be evaluated against a
broad range of criteria.
Areas to be included in Supplier Evaluation
Attributes
Means of appraisal
Minimum Expectations
The criteria listed here
are to be reviewed
further and provide
only an indication of
the range of attributes
to be considered
during the supplier
selection process.
Financial Status

«xxxx»

«i.e. “Secure” or better»
Conviction of Criminal
Offences

«xxxx»

No conflictions
Business Probity

«xxxx»

No occurrences
Technical and Professional
Ability

«xxxx»

Meets minimum standards
Health and Safety

«xxxx»

Must be related to the
requirements of the contract
Quality Assurance

«xxxx»

«i.e. ISO 14001 or equivalent»
Corporate Social
Responsibility

«xxxx»

Must be related to the
requirements of the contract
Insurance

«xxxx»

Availability of required policies
Transactional Efficiency

«xxxx»

«i.e. Use of ePS and P-Card»
30
Supplier Award Criteria
Potential suppliers will
be evaluated against a
broad range of criteria.
The criteria listed here
are to be reviewed
further and provide
only an indication of
the range of attributes
to be considered
during the supplier
selection process.
Areas to be included in Supplier Evaluation
Attributes
Means of appraisal
Minimum Expectations
Price

«xxxx»

«xxxx»
Quality

«xxxx»

meets required quality
Technical Merit

«xxxx»

meets specification
Delivery

«xxxx»

« i.e. Delivery date, period or
period of completion »
Technical Assistance

«xxxx»

Can provide required service
Running Costs and
effectiveness

«xxxx»
Implementation Capability

«xxxx»

«xxxx»
Account Management / MI

«xxxx»
Product Range

«xxxx»

«xxxx»
Transactional Efficiency

«xxxx»

«i.e. Use of ePS and P-Card»
Environmental
Characteristics

«xxxx»

Must be linked to the subject
matter of the contract
After-Sales Service
Source:
Spikes Cavell
31
Communication Plan
Comments….
In addition to the work carried out by the UIG outline how the category strategy and final outcomes will be
communicated to individual organisations
- << i.e. road shows>>
- << workshops>>
- << website>>
- <<XXXXX>>
Do CoEs or individual organisations need to provide information or commitment and at what stage of the
strategy development or implementation?
- << i.e. intention to participate – before we go out to tender>>
- << sign an Agency Agreement – before the Framework is established>>
prior to the first order
- << sign a Participation Agreement – after the Framework is established and
being placed>>
- <<XXXXX>>
Timescales for critical activities
- << outline key dates>>
- <<XXXXX>>
- <<XXXXX>>
32
Implementation Plan
Comments….
Key steps and requirements
• <<Outline requirements>>
• <<XXXXXXXXXXXX>>
• <<XXXXXXXXXXXX>>
Content Management requirements
• <<XXXXXXXXXXXX>>
•<<XXXXXXXXXXXX>>
Resources and structure
• <<outline>>
• <<XXXXXXXXXXXX>>
• <<XXXXXXXXXXXX>>
Timescales
• <<outline>>
• <<XXXXXXXXXXXX>>
• <<XXXXXXXXXXXX>>
Evaluation and Control
•<<outline>>
• <<XXXXXXXXXXXX>>
• <<XXXXXXXXXXXX>>
33
Contract and Supplier Management
The Authority is
Overview
committed to
managing, monitoring
Strategic Objectives
and developing
This approach to Contract & Supplier Management has been developed to;
supplier performance
•Drive continual improvement and benefits from existing and future contractual relationships
and understanding
•Ensure that all parties to contracts were meeting their obligations
whether our contracts
•Measure performance against KPI’s & SLA’s
are delivering and
•Measure behaviours such as communication, responsiveness and innovation
meeting the needs of
•Provide end users with an opportunity to provide feedback on supplier & contract performance
our customers.
•Be consistently applied across all categories
Scope
The term ‘contract & supplier management’ can be broken down into the following key component parts:
•Contract Implementation and Management
•Supplier Management and Development
•Operational Management
•Contract Administration
•Supply Chain Innovation & Development
34
Contract and Supplier Management
The Authority is
committed to
Approach
A balanced scorecard approach has been developed to manage, monitor and develop supplier performance.
The scorecard has 4 core indicators and suggested sub-criteria as follows:
managing, monitoring
and developing
supplier performance
and understanding
whether our contracts
are delivering and
meeting the needs of
our customers.
Balanced Scorecard
Quality
Fit for Purpose
Returns
CSR
Continual Improvement/Innovation
Service
Responsiveness
Complaints
Management Information
Education/Training
Communication
Delivery
Lead time/delivery time
On time delivery against objectives
Accuracy
Cost
Pricing stability
Invoice accuracy
Cost reduction initiatives
At this stage buyers should be aware of the requirement to consider CSM. Further development is required at
the ITT stage when Management Information needs will be defined and when KPIs will be identified. The
scorecard will be finalised at the contract award stage.
35