Description
The documentation describes on strategic sourcing.
Introduction “Strategic Sourcing is a comprehensive process aimed at obtaining maximum advantage on cost, technology, process and quality, by leveraging the company’s buying power”. The strategy is to shift the company’s focus from the current “transaction” oriented independent buying of goods and services to a “product” oriented strategic approach. The Strategic Sourcing approach is designed to: • drive reduction in total cost of acquisition of goods and services • drive a thorough understanding of both the supply market and internal company requirements • deliver significant earnings to bottom line • deliver improved value to all
High Value Opportunities How can a company identify the highest impact cost reduction opportunities? To begin, they must understand what they buy and from whom they buy it. Thoroughly reviewing accounts payable history and mapping expenditures, can provide tremendous insight into corporate savings opportunities. There are varieties of solutions to address • Increase customer leverage and buying power – By harnessing intra-company expenditures and selecting fewer suppliers in each buying category, companies can gain significant leverage. They can also deepen their advantage through inter-company aggregation and supplier rationalization. • Rationalizing product specifications – By developing processes that clearly define the need before translating that to a specification, companies can avoid unnecessary costs • Source more effectively – By engaging a large number of qualified suppliers during supplier selection and creating a more competitive negotiating environment. • Improve financial controls and contract compliance – To achieve bottom line benefits, buyers need to buy against contracts easily and need to control spend activity through a procurement tool. • Doing Procurement Right – To extract the maximum value from procurement, companies need to understand their spending, select the best approach to source, procure each set of goods and services and continuously monitor performance.
The Significant Steps So how can a company effectively achieve measurable and sustainable cost savings? They must address the entire procurement value chain from savings identification, to negotiation and must importantly, realization. The THIRTEEN essential steps are described below: Step 1 - Assess the opportunities : A complete spend assessment will provide visibility in company?s needs, their total buying power and the degree to which they are leveraging that power Step 2 - Source for savings : An effective sourcing methodology will address product specification rationalization, recommend standard buying practices, use the most appropriate
sourcing and negotiation strategy for the category and achieve the lowest total cost Step 3 – Turn Contracts : Enable buyers and suppliers turn contracts into commerce - to realize savings, they must not only connect users to contracts but also ensure that users can accurately and confidently buy against those contracts Step 4 – Management Tools : Transact through management tools to capture savings - by utilizing computerization, companies not only drive compliance against contracts but also streamline processes and increase control on spending Step 5 – Improvements : Manage continuous improvements - in order to maximize and sustain savings, companies need to drive improvements and manage suppliers Step 6 - Categorization Process : This involves a detailed analysis for all the purchases made by the company for the past one or two years and broadly classify the spend in few major sourcing groups (SG) Step 7 - Spend-profile each sourcing group : Each of the Sourcing Groups need to be clearly defined by identifying sub-groups, spend profile of each sub-group, cost drivers involved and the supply market behavior for each SG. Step 8 -Develop Strategy : Each SG is analyzed with respect to the supply market. For the sourcing group with low market complexity, buyer has a strong position compared to supplier and should exploit its buying power through the tools of volume concentration, best price evaluation and global sourcing. Step 9 -Develop Supplier Profile : Develop a list of current and new suppliers and prepare profiles for later use. Define minimum requirements necessary to be met by any supplier and screen the preliminary supplier list. Establish qualification criteria to evaluate suppliers and to agree on shortlist of suppliers with whom to conduct negotiations. Request for Information and develop a comprehensive pre-qualification questionnaire (PQI) to seek detailed information from suppliers to develop their profiles. Step 10 - Implementation Methodology : For the competitive selection process, and request for quotation (RFQ) is prepared to obtain a detailed understanding of the supplier?s profile, scope of work/services, cost, specifications, alternatives etc. Supplier development approach is generally recommended when the company is very confident of its key supplier with regards to their price, quality, delivery and reliability. Here, the company works together with their key suppliers towards joint process improvements, standardizing specifications and relationship restructuring. Step 11 - Competitive Supplier Selection : The responses to the RFQ issued, are thoroughly analyzed for price and non price factors. This price analysis forms the basis for subsequent negotiation strategies, enabling the team to drive the best overall agreement. The price analysis forms the basis for subsequent negotiation strategies, enabling the team to drive the best overall agreement. Step 12 - Integrate the strategic agreements into operations : With strategic alliance agreements in place, it is of utmost importance to ensure the use of these agreements by all concerned throughout the company. Top management?s conviction and total support is a must
for integrating the strategic sourcing agreements with the day to day operations of the company Step 13 - Benchmark to Improve : This step ensures that sourcing group strategies continue to be effective and the supplier capabilities, arrangements and the purchasing process remain the leading edge. Continuous benchmarking of external and internal factors is must to continue moving ahead on the success path. Categorization of Items CRITICAL CRITICALITY ITEMS HIGH RATE CONTRACTS GENERAL CRITICALITY ITEMS LOW REVERSE AUCTIONS LOW VALUE STRATEGIC ITEMS STRATEGIC SOURCING BULK PURCHASE ITEMS INTERNET PURCHASE HIGH VALUE
Identify the various items of procurement and categorize them in the following FOUR quadrants based on the VALUE and CRITICALITY. The Sourcing Strategy would depend on the position of the group of items in the four quadrants as indicated. The high value and high critically would call for Strategic Sourcing while low value and high criticality would be covered by long term rate contracts. On the other hand, high value and low criticality (bulk items) can be covered through Internet, while the low value and low criticality items, are ideal for reverse auctions. 05 TIPS FOR SUCCESS Strategic Sourcing is an important activity for which certain basic features are must to ensure its success and they are: • Total long term commitment from top management • Considerable involvement in terms of money and manpower • Empowering the strategic sourcing teams • Disciplined and consistent practice • Continuous monitoring and tracking the progress • Effective use of electronic tools like internet, e-mail etc., for quick and effective communication. Action Plans • Rationalization of suppliers - weed off non performing suppliers and add best-in-class suppliers through continuous vendor rating process • Material cost reduction - increase share of business for performing suppliers and develop cost sheets. Introduce two-bin and Kanban system, collect materials through milk runs to achieve JIT supplies • Supplier development - audit suppliers for process improvements and create capacity for increased demand, by introducing new suppliers. Introduce group buying and look for global buying opportunities including e-sourcing.
Value Creation through Strategic Sourcing Introduction Marketing, Finance and Production have so far been regarded as the focus-area of top management. Things are changing; increasing awareness that the company spends 60 - 70 % of the cost of goods sold in purchasing has made purchasing a promising area to hunt for facing global competitiveness. This fact has been realized by some of the progressive companies in India along with its counter parts in Western World, Tata Steel is one amongst them. The matrix shown in the figure: 1 defines the impact of purchasing function for an organization:
Companies are now placing best people in their purchasing functions. While skilful contract negotiations could extract price discounts of between 1 and 5 percent from suppliers, today?s cost pressures for 10 to 30 percent price reductions require a totally new set of purchasing skills: challenging materials specifications, questioning products and their package designs, and influencing “make” versus “buy” decisions etc. Further with increased competition in the marketplace, an organization?s success could well be tied to the ability of its suppliers to invest in new product development, respond to a change in demand or indeed work together to achieve improvements in network or manufacturing design and efficiency. Purchasing and supplier collaboration can reduce the need for large inventories and quickly introduce goods and services to accommodate new product designs as well as changes in existing ones. In situations like this, program like Strategic Sourcing, which focus on the following assumes greater importance in keeping organizations competitive advantage. • Developing in-depth understanding for knowledge based buying • Developing systems and procedures for building World–Class purchasing organization • Building sustained value creating relationships with suppliers Strategic Sourcing is being recognized as separate function and necessary action is being taken by most of the corporate in this field. World over, though the objective of Strategic Souring is same, organizations adopt different ways of implementing it, so does Tata Steel. Strategic Sourcing Methodology: What is Strategic Sourcing? A typical Purchasing Function is limited to transactional job of collecting information about the requirements of user department and carrying out commercial checks and balances to finally procure the product & service. The information collected in the process is rather consequential and the relationship with vendor at best one sided.
Strategic sourcing recognizes that people, including innovative suppliers, are a valuable part of an organization and focuses on reducing waste or non-value-added costs. It is defined as: “A disciplined, systematic process for reducing the total costs of externally purchased materials, products and services while maintaining or improving levels of quality, service and technology”. Strategic Sourcing studies are tedious and time-consuming initiatives. The block diagram of strategic sourcing methodology followed in Tata Steel is shown in figure: 2.
Commodity Matrix: The process of strategic sourcing starts with spends analysis, which identifies, consolidate and standardize information from a wide range of data sources. The outcome of this spend analysis is the commodity matrix. Tata Steel, part of its annual Strategy Development Process, revisits „Commodity Matrix?. It is a methodology for classifying commodities in four quadrants. It categorizes expenditure on two dimensions: Complexity of the product and saving potential of the product. Analyzing these dimensions of the product / service reveals the commodities that are to be considered for strategic sourcing study. (Refer figure: 3 for „Commodity Matrix?) Core items are those that directly impact the company?s throughput. The buy value of these items are high and so the complexity of product. These items are generally manufactured by medium to large companies; the thrust is on developing alliances. E.g. Refractory for Steel Industries, Sponge iron, Aluminium etc.
Commodity items do not directly impact the company?s throughput, but they play an important role in reducing the downtime of the plant and machinery. Complexity and saving potential of these items are less comparison to core items. Since these items are typically bought throughout the company under various applications (wide variety) and their demand too fluctuates, the challenge lies in consolidation & standardization. e.g. Cement, Electrical and Mechanical Spares etc General items, like commodity items, do not impact the throughput of the company but they facilitate the creation of a congenital working environment. These items are also bought throughout the organization but unlike commodity items they are more or less standardized. So, the challenge lies in consolidating company-wide buy so as to maximize the volume. E.g. cell phone, personal computers, printers and other office supplies. Critical items: these items are important from the safety, health and ergonomics point of view of the employee. The complexities of these items are high - what is important here is the right specification. The Structure of Strategic Sourcing @ Tata Steel: Strategic sourcing studies are cross-functional in nature and are called Commodity Competence Teams (CCT). CCT comprises members from user departments, expert groups, commodity managers from procurement organization (supplier inclusion on need based) etc.
Segment Steering Committee (SSC) (figure no.4) which review the progress of Strategic Sourcing initiative are chaired by senior executives of the company and comprises members from user departments, expert groups etc (see figure). SSC provides: • Provides strategic direction and guidance, • Establish performance targets, • Review progress of the CCTs, and • Provide support for successful implementation. At the end of in-depth study on internal requirements and external analysis of commodity, CCTs has two methodologies for performing Strategic sourcing study: • Strategic Sourcing through Sourcing Levers, • Strategic Sourcing through Supplier Value Management (SVM)
Strategic Sourcing through Sourcing Levers This methodology talks about appropriate supplier screening mechanism, developing process maps and bottom-up costing etc. After completion of these steps, the team develops appropriate sourcing levers closing the deals with the suppliers. Strategic Sourcing through Supplier Value Management (SVM): How it is different from Sourcing Lever Approach of Strategic Sourcing: The sourcing lever approach of Strategic Sourcing addresses the internal value chain of Tata Steel and some cases goes up to distribution channels of suppliers. The “Supplier Value Management” not only address the internal value chain, but it also addresses the value chain of suppliers. Unlike other process, SVM considers the value chain of the supplier and that of Tata Steel as the single entity and understands that any enhancement / improvement at the suppliers end will directly enhance the value delivered to the end customer. This program also gives an opportunity to study the supply chain of the suppliers and identify revenue leakages. Selection of commodity for SVM: The selection of commodity and the supplier is the main distinguishing factor between SVM and Sourcing Lever approach of Strategic Sourcing. Tata Steel follows following criteria for conducting SVM with suppliers: • Supplier should be a manufacturer • Tata Steel?s to be key customer for the supplier • The commodity should have direct impact on Tata Steel?s throughput • Share the same values and culture of Tata Steel (Cultural fit) • Willingness to be a long-term partner with Tata Steel Conclusion: As companies seek to discover ways to increase overall excellence and competitiveness, a new source of value has emerged – Strategic Sourcing. Strategic Sourcing is a proven approach to understanding and delivering significant cost reduction and building a sustained value-creating relationship with the suppliers. The fundamental objective of any organization is lowering the cost of goods manufactured. This can be achieved through reduction in prices of purchased products & services and reduction in their specific consumption. Strategic Sourcing does exactly the same by addressing the total cost. Purchasing Organizations have come a long way over the past decade. From the starting point of the traditional buy-sell, transaction-based purchasing, the practice has moved through stages of change that redefines most aspect of the business. At Tata Steel, Strategic Sourcing has delivered 80 million US $ over last 5 years and these savings continue to grow every year. This has played a key role in making Tata Steel the lowest cost producer of steel.
doc_136832670.docx
The documentation describes on strategic sourcing.
Introduction “Strategic Sourcing is a comprehensive process aimed at obtaining maximum advantage on cost, technology, process and quality, by leveraging the company’s buying power”. The strategy is to shift the company’s focus from the current “transaction” oriented independent buying of goods and services to a “product” oriented strategic approach. The Strategic Sourcing approach is designed to: • drive reduction in total cost of acquisition of goods and services • drive a thorough understanding of both the supply market and internal company requirements • deliver significant earnings to bottom line • deliver improved value to all
High Value Opportunities How can a company identify the highest impact cost reduction opportunities? To begin, they must understand what they buy and from whom they buy it. Thoroughly reviewing accounts payable history and mapping expenditures, can provide tremendous insight into corporate savings opportunities. There are varieties of solutions to address • Increase customer leverage and buying power – By harnessing intra-company expenditures and selecting fewer suppliers in each buying category, companies can gain significant leverage. They can also deepen their advantage through inter-company aggregation and supplier rationalization. • Rationalizing product specifications – By developing processes that clearly define the need before translating that to a specification, companies can avoid unnecessary costs • Source more effectively – By engaging a large number of qualified suppliers during supplier selection and creating a more competitive negotiating environment. • Improve financial controls and contract compliance – To achieve bottom line benefits, buyers need to buy against contracts easily and need to control spend activity through a procurement tool. • Doing Procurement Right – To extract the maximum value from procurement, companies need to understand their spending, select the best approach to source, procure each set of goods and services and continuously monitor performance.
The Significant Steps So how can a company effectively achieve measurable and sustainable cost savings? They must address the entire procurement value chain from savings identification, to negotiation and must importantly, realization. The THIRTEEN essential steps are described below: Step 1 - Assess the opportunities : A complete spend assessment will provide visibility in company?s needs, their total buying power and the degree to which they are leveraging that power Step 2 - Source for savings : An effective sourcing methodology will address product specification rationalization, recommend standard buying practices, use the most appropriate
sourcing and negotiation strategy for the category and achieve the lowest total cost Step 3 – Turn Contracts : Enable buyers and suppliers turn contracts into commerce - to realize savings, they must not only connect users to contracts but also ensure that users can accurately and confidently buy against those contracts Step 4 – Management Tools : Transact through management tools to capture savings - by utilizing computerization, companies not only drive compliance against contracts but also streamline processes and increase control on spending Step 5 – Improvements : Manage continuous improvements - in order to maximize and sustain savings, companies need to drive improvements and manage suppliers Step 6 - Categorization Process : This involves a detailed analysis for all the purchases made by the company for the past one or two years and broadly classify the spend in few major sourcing groups (SG) Step 7 - Spend-profile each sourcing group : Each of the Sourcing Groups need to be clearly defined by identifying sub-groups, spend profile of each sub-group, cost drivers involved and the supply market behavior for each SG. Step 8 -Develop Strategy : Each SG is analyzed with respect to the supply market. For the sourcing group with low market complexity, buyer has a strong position compared to supplier and should exploit its buying power through the tools of volume concentration, best price evaluation and global sourcing. Step 9 -Develop Supplier Profile : Develop a list of current and new suppliers and prepare profiles for later use. Define minimum requirements necessary to be met by any supplier and screen the preliminary supplier list. Establish qualification criteria to evaluate suppliers and to agree on shortlist of suppliers with whom to conduct negotiations. Request for Information and develop a comprehensive pre-qualification questionnaire (PQI) to seek detailed information from suppliers to develop their profiles. Step 10 - Implementation Methodology : For the competitive selection process, and request for quotation (RFQ) is prepared to obtain a detailed understanding of the supplier?s profile, scope of work/services, cost, specifications, alternatives etc. Supplier development approach is generally recommended when the company is very confident of its key supplier with regards to their price, quality, delivery and reliability. Here, the company works together with their key suppliers towards joint process improvements, standardizing specifications and relationship restructuring. Step 11 - Competitive Supplier Selection : The responses to the RFQ issued, are thoroughly analyzed for price and non price factors. This price analysis forms the basis for subsequent negotiation strategies, enabling the team to drive the best overall agreement. The price analysis forms the basis for subsequent negotiation strategies, enabling the team to drive the best overall agreement. Step 12 - Integrate the strategic agreements into operations : With strategic alliance agreements in place, it is of utmost importance to ensure the use of these agreements by all concerned throughout the company. Top management?s conviction and total support is a must
for integrating the strategic sourcing agreements with the day to day operations of the company Step 13 - Benchmark to Improve : This step ensures that sourcing group strategies continue to be effective and the supplier capabilities, arrangements and the purchasing process remain the leading edge. Continuous benchmarking of external and internal factors is must to continue moving ahead on the success path. Categorization of Items CRITICAL CRITICALITY ITEMS HIGH RATE CONTRACTS GENERAL CRITICALITY ITEMS LOW REVERSE AUCTIONS LOW VALUE STRATEGIC ITEMS STRATEGIC SOURCING BULK PURCHASE ITEMS INTERNET PURCHASE HIGH VALUE
Identify the various items of procurement and categorize them in the following FOUR quadrants based on the VALUE and CRITICALITY. The Sourcing Strategy would depend on the position of the group of items in the four quadrants as indicated. The high value and high critically would call for Strategic Sourcing while low value and high criticality would be covered by long term rate contracts. On the other hand, high value and low criticality (bulk items) can be covered through Internet, while the low value and low criticality items, are ideal for reverse auctions. 05 TIPS FOR SUCCESS Strategic Sourcing is an important activity for which certain basic features are must to ensure its success and they are: • Total long term commitment from top management • Considerable involvement in terms of money and manpower • Empowering the strategic sourcing teams • Disciplined and consistent practice • Continuous monitoring and tracking the progress • Effective use of electronic tools like internet, e-mail etc., for quick and effective communication. Action Plans • Rationalization of suppliers - weed off non performing suppliers and add best-in-class suppliers through continuous vendor rating process • Material cost reduction - increase share of business for performing suppliers and develop cost sheets. Introduce two-bin and Kanban system, collect materials through milk runs to achieve JIT supplies • Supplier development - audit suppliers for process improvements and create capacity for increased demand, by introducing new suppliers. Introduce group buying and look for global buying opportunities including e-sourcing.
Value Creation through Strategic Sourcing Introduction Marketing, Finance and Production have so far been regarded as the focus-area of top management. Things are changing; increasing awareness that the company spends 60 - 70 % of the cost of goods sold in purchasing has made purchasing a promising area to hunt for facing global competitiveness. This fact has been realized by some of the progressive companies in India along with its counter parts in Western World, Tata Steel is one amongst them. The matrix shown in the figure: 1 defines the impact of purchasing function for an organization:
Companies are now placing best people in their purchasing functions. While skilful contract negotiations could extract price discounts of between 1 and 5 percent from suppliers, today?s cost pressures for 10 to 30 percent price reductions require a totally new set of purchasing skills: challenging materials specifications, questioning products and their package designs, and influencing “make” versus “buy” decisions etc. Further with increased competition in the marketplace, an organization?s success could well be tied to the ability of its suppliers to invest in new product development, respond to a change in demand or indeed work together to achieve improvements in network or manufacturing design and efficiency. Purchasing and supplier collaboration can reduce the need for large inventories and quickly introduce goods and services to accommodate new product designs as well as changes in existing ones. In situations like this, program like Strategic Sourcing, which focus on the following assumes greater importance in keeping organizations competitive advantage. • Developing in-depth understanding for knowledge based buying • Developing systems and procedures for building World–Class purchasing organization • Building sustained value creating relationships with suppliers Strategic Sourcing is being recognized as separate function and necessary action is being taken by most of the corporate in this field. World over, though the objective of Strategic Souring is same, organizations adopt different ways of implementing it, so does Tata Steel. Strategic Sourcing Methodology: What is Strategic Sourcing? A typical Purchasing Function is limited to transactional job of collecting information about the requirements of user department and carrying out commercial checks and balances to finally procure the product & service. The information collected in the process is rather consequential and the relationship with vendor at best one sided.
Strategic sourcing recognizes that people, including innovative suppliers, are a valuable part of an organization and focuses on reducing waste or non-value-added costs. It is defined as: “A disciplined, systematic process for reducing the total costs of externally purchased materials, products and services while maintaining or improving levels of quality, service and technology”. Strategic Sourcing studies are tedious and time-consuming initiatives. The block diagram of strategic sourcing methodology followed in Tata Steel is shown in figure: 2.
Commodity Matrix: The process of strategic sourcing starts with spends analysis, which identifies, consolidate and standardize information from a wide range of data sources. The outcome of this spend analysis is the commodity matrix. Tata Steel, part of its annual Strategy Development Process, revisits „Commodity Matrix?. It is a methodology for classifying commodities in four quadrants. It categorizes expenditure on two dimensions: Complexity of the product and saving potential of the product. Analyzing these dimensions of the product / service reveals the commodities that are to be considered for strategic sourcing study. (Refer figure: 3 for „Commodity Matrix?) Core items are those that directly impact the company?s throughput. The buy value of these items are high and so the complexity of product. These items are generally manufactured by medium to large companies; the thrust is on developing alliances. E.g. Refractory for Steel Industries, Sponge iron, Aluminium etc.
Commodity items do not directly impact the company?s throughput, but they play an important role in reducing the downtime of the plant and machinery. Complexity and saving potential of these items are less comparison to core items. Since these items are typically bought throughout the company under various applications (wide variety) and their demand too fluctuates, the challenge lies in consolidation & standardization. e.g. Cement, Electrical and Mechanical Spares etc General items, like commodity items, do not impact the throughput of the company but they facilitate the creation of a congenital working environment. These items are also bought throughout the organization but unlike commodity items they are more or less standardized. So, the challenge lies in consolidating company-wide buy so as to maximize the volume. E.g. cell phone, personal computers, printers and other office supplies. Critical items: these items are important from the safety, health and ergonomics point of view of the employee. The complexities of these items are high - what is important here is the right specification. The Structure of Strategic Sourcing @ Tata Steel: Strategic sourcing studies are cross-functional in nature and are called Commodity Competence Teams (CCT). CCT comprises members from user departments, expert groups, commodity managers from procurement organization (supplier inclusion on need based) etc.
Segment Steering Committee (SSC) (figure no.4) which review the progress of Strategic Sourcing initiative are chaired by senior executives of the company and comprises members from user departments, expert groups etc (see figure). SSC provides: • Provides strategic direction and guidance, • Establish performance targets, • Review progress of the CCTs, and • Provide support for successful implementation. At the end of in-depth study on internal requirements and external analysis of commodity, CCTs has two methodologies for performing Strategic sourcing study: • Strategic Sourcing through Sourcing Levers, • Strategic Sourcing through Supplier Value Management (SVM)
Strategic Sourcing through Sourcing Levers This methodology talks about appropriate supplier screening mechanism, developing process maps and bottom-up costing etc. After completion of these steps, the team develops appropriate sourcing levers closing the deals with the suppliers. Strategic Sourcing through Supplier Value Management (SVM): How it is different from Sourcing Lever Approach of Strategic Sourcing: The sourcing lever approach of Strategic Sourcing addresses the internal value chain of Tata Steel and some cases goes up to distribution channels of suppliers. The “Supplier Value Management” not only address the internal value chain, but it also addresses the value chain of suppliers. Unlike other process, SVM considers the value chain of the supplier and that of Tata Steel as the single entity and understands that any enhancement / improvement at the suppliers end will directly enhance the value delivered to the end customer. This program also gives an opportunity to study the supply chain of the suppliers and identify revenue leakages. Selection of commodity for SVM: The selection of commodity and the supplier is the main distinguishing factor between SVM and Sourcing Lever approach of Strategic Sourcing. Tata Steel follows following criteria for conducting SVM with suppliers: • Supplier should be a manufacturer • Tata Steel?s to be key customer for the supplier • The commodity should have direct impact on Tata Steel?s throughput • Share the same values and culture of Tata Steel (Cultural fit) • Willingness to be a long-term partner with Tata Steel Conclusion: As companies seek to discover ways to increase overall excellence and competitiveness, a new source of value has emerged – Strategic Sourcing. Strategic Sourcing is a proven approach to understanding and delivering significant cost reduction and building a sustained value-creating relationship with the suppliers. The fundamental objective of any organization is lowering the cost of goods manufactured. This can be achieved through reduction in prices of purchased products & services and reduction in their specific consumption. Strategic Sourcing does exactly the same by addressing the total cost. Purchasing Organizations have come a long way over the past decade. From the starting point of the traditional buy-sell, transaction-based purchasing, the practice has moved through stages of change that redefines most aspect of the business. At Tata Steel, Strategic Sourcing has delivered 80 million US $ over last 5 years and these savings continue to grow every year. This has played a key role in making Tata Steel the lowest cost producer of steel.
doc_136832670.docx