Strategic Sourcing: Optimizing the process to gain a ...

1 Strategic SourcingOptimizing the process to gain a competitive advantageIn partnership with2 Strategic SOURCINGO ptimizing the process to gain a competitive advantageStrategic SourcingQuebec Manufacturers & Exporters (QME) is an association whose mission it is to improve the business environment and to help manufacturers and exporters be more competitive on domestic and international markets by bringing to bear its leadership, expertise, connections and the strengths of its membership. Its activities rest on five pillars: advocacy, intelligence, business opportunities, best practices and is a division of Canadian Manufacturers & Exporters (CME), Canada s largest trade and industry association, founded in further information on QME or to become a member of the association, please visit our website at or contact us at:360 Saint-Jacques Street, Suite M201 Montreal QC H2Y 1P5 This guide has been developed by QME s Strategic sourcing Expert Network and produced in partnership with Export Development Canada (EDC), whose mandate is to help Canadian companies of all sizes sell their goods and services to international more information on EDC, visit rights reserved for all countries.

2 The contents of this document may not be reproduced in full or in part by any means whatsoever, including but not limited to graphic, electronic or mechanical, without the written authorization of Quebec Manufacturers & Strategic SOURCINGEDC: Your Partner in Trade To survive in today s economy, you have to go global. But you don t have to go it alone. For more than 70 years, EDC has been helping Canadian companies of all sizes to trade internationally. By providing financing and insurance solutions, we help businesses minimize risk, while maximizing opportunities. And we can help InsuranceMore customers. More cash. Because credit insurance protects against a range of commercial and political risks, you can offer customers more flexible payment terms without sweating your bottom bonds and guarantees is a necessary part of exporting, which can tie-up your bank line.

3 Our bonding and guarantee solutions offered in partnership with financial institutions can help you free-up the working capital you you re looking to break into a new market, fill an order or participate in a large-scale global project, our financing solutions can help you access a reliable source of working capital to keep your sales cycle running learn how EDC can help you sell to the most promising markets abroad, visit EDC s credit insurance .. and get your sales to customers outside of Canada is a great way to increase your profits. But no matter who your customers are, there s always the risk of not getting paid. With EDC s credit insurance, you re covered for up to 90% of your loss if your customer doesn t pay. Think about it; you wouldn t run your business without property insurance, so why export without credit insurance?

4 If your company s biggest asset is your accounts receivable, then it only makes good business sense to ensure they are properly more about EDC s credit insurance. YOUR PROFIT YOUR EXPORT Strategic SOURCINGA Word from the QME President ..6A Word from the Strategic sourcing Steering Committee ..7 Members of the sourcing Network ..8 Introduction ..91 Internal customer relationship management Define the customer s needs .. Ensure the customer s commitment .. Confirm the customer s needs .. Identify possibilities, benefits and risks .. Define the supplier relationship type .. Sharing of the overall plan and roles ..192 Market and risk analyses Supply market analysis .. Demand market analysis .. Calculating total acquisition cost.

5 Risk analysis of options ..233 Developing a supplier selection strategy Determining the approach .. Supplier evaluation criteria .. Preparing a detailed plan ..304 Making contact with the market Calls for bids .. Managing the selection process .. Evaluating calls for bids ..345 Negotiations Preparing the negotiation strategy .. Conducting the negotiations .. Concluding the negotiations ..426 The contract Risk-related clauses .. Drafting the contract .. Example of a list of clauses .. Approvals and signatures ..477 Implementation Communication plan .. Updating data in systems .. Implementation of monitoring processes .. The contingency plan ..528 Supplier relationship management Performance indicators.

6 Conducting performance meetings .. Contract revisions .. Updating the catalogue ..589 Partner relationship management Definition and communication of partnership type .. Other conditions for a successful partnership ..66 CONCLUSION ..70 Annexes A Contract checklist ..70B sourcing agreement implementation plan ..72C Measurement of total acquisition cost ..73D Determining the non-quality cost of a supplier ..74E Useful web links for researching suppliers ..74F Example of supplier audit ..75G Example of risk analysis ..75H Supplier self-evaluation ..76 List of tables1 Comparison between Strategic and tactical tasks ..122 Product categorization ..173 Strategies to favour by product category ..254 Customer s principal concerns regarding the respective size of the companies in a customer-supplier relationship.

7 275 Customer-supplier relationship type by product category ..376 Example of supplier evaluation dashboard ..557 Example of the total cost of sourcing for a supplier ..568 Example of the determination of planning horizons ..67 List of figures1 Customer-supplier relationship continuum ..192 Personality types ..413 Example of the complete measurement of service ..564 Example of an extended value stream map between a contractor and a subcontractor ..615 Example of a joint partnership management structure ..636 Organization of the channels of communication between partners ..647 Model for evaluating the relationship between an original equipment manufacturer and a partner on the basis of seven dimensions ..658 Example of a supplier-managed replenishment model.

8 679 Example of a simplified joint product development process ..68 Table of Contents6 Strategic sourcing introductionA Word from the QME PresidentThrough the advocacy we practise, the intelligence we produce, the business opportunities we offer, the best practices network and activities we organize, and the networking we promote, Quebec Manufacturers & Exporters (QME) is unrelenting in its efforts to cultivate an enabling environment of the highest degree for Quebec this end, one winning strategy proposed by QME has been to create several expert networks that bring leaders together to share their experiences and success in relation to a variety of topics, including continuous improvement, sustainable development, health and safety, and of course, and competitiveness are an ongoing battle for manufacturers.

9 Those who manage to stand out are constantly reinventing their ways of operating, including in Strategic areas such as companies are aware that their value chain is only as strong as its weakest link. This is why they deploy considerable efforts to strengthen and develop that value chain at all times. We are convinced that the practices described in this guide, which are employed by manufacturers who are leaders in their field, will serve as a source of inspiration to businesses wishing to elevate their performance have the good fortune within QME s expert networks to be able to count on top-ranking manufacturers who readily open their doors and share their practices for the benefit of the Quebec manufacturing community. We thank them most sincerely for their generosity and salute their inexorable drive to always do Pr vostPresident, Quebec Manufacturers & Exporters7 Strategic sourcing introductionA Word from the Strategic sourcing Steering CommitteeWe are proud to present to you this guide to good practice Strategic is the fruit of a collaborative endeavour carried out over the past two years.

10 Drafted by Strategic sourcing executives working for a variety of Quebec manufacturers, it is intended to provide managers with concrete than 25 businesses, member of QME s Strategic sourcing Expert Network took part in exchanges on winning practices and on the lessons learned from their application in the field. This guide is meant, therefore, to provide an overview of principles that have already been tried and tested successfully in the field. It is not intended to cover every aspects and details that characterize this constantly evolving area of expertise. We would like to express our deepest gratitude to the companies that met with us and kindly shared their a globalized economy, Strategic sourcing constitutes a vital key to the future success of Quebec businesses.