PROCUREMENT STRATEGY COMPONENTS

Internal Needs
Volume Specifications (functionality, supplier or Numico led) Demand seasonality Growth Historical price development Impact on business Legal Quality risks Current suppliers Current balance of power Key cost drivers Price breakdown Total cost of ownership Value chain mapping Impact on consumer Ongoing activity Product Life Cycle stage Innovation requirements SKU complexity Levels of inventory vs lead times Payables Link to 3rd party activities

Supply Market
1st tier supply players 2nd tier suppliers Supplier segmentation Growth / Seasonality Key cost drivers evolution Technology available and evolution Capacity installed (levels of occupation) PESTL (Political, Economic, Social, Technological, Legislative) Currency exposure (hedging possibilities) Financial indicators (ratios) % spend on R&D / Innovation activity Volatility of raw materials

Demand Market
Upstream competitors (what is their sourcing strategy) Benchmark of direct competitors

Growth / Seasonality

Summary
Balance of Power - Degree of concentration of demand vs degree of concentration in 1st and 2nd tier supply Porters Analysis: Power of 2nd tier suppliers, 1st tier suppliers or converters, New entrants, Customers and Substitutes Make vs buy SWOT analysis

Strategy Building
Target: Increase Balance of Power Improve price understanding Increase competitive edge Reduce supply costs RFQ format (Tool kit) Short/Medium/Long term objectives Risk Management Risks identification Likelihood of occurrence x impact of occurrence Competitors situation and approach Proposed mitigating actions and implementation plan Contingency plan Supplier evaluation Establish set of Supplier Performance Measurement Systems Reward systems Supplier targetting Innovation support Specification evolution plans

Action Plan
Negotiation tactics to be employed E-auction or on line bidding methodology Resources needed Time plan with key milestones Results / benefits: Hard and soft, qualitative. Obstacles and challenges