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Winning Business Cases: How To Develop, Structure, and Present Them
Winning Business Cases: How To Develop, Structure, and Present Them
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Ralph G Kauffman
University of Houston - Downtown
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All content following this page was uploaded by Ralph G Kauffman on 12 November 2014.
Abstract. To be effective as a purchasing and supply chain professional, the ability to develop
robust business cases is essential. This paper provides a step-by-step approach to building
persuasive business cases to support strategic, tactical, or operational purchasing, sourcing,
and supply chain activities. The focus will be on suggesting an approach, identifying key
elements, and discussing challenges that must be overcome, particularly in a global setting.
Current Business Processes and Needs. Top management at public and private
organizations have rising expectations that purchasing and supply activities can lower costs,
improve leveraging, capture synergies, reduce cycle time, drive down inventory carrying costs
and improve the bottom line. The increasingly competitive environment, enhanced by
globalization, makes business case development an imperative. Prepared business cases
must be compelling to win stakeholder support necessary to implement any new cost savings
programs in purchasing and supply. Many organizationa l cultures favor individual bottom line
performance as opposed to overall organizational bottom line performance. Many
organizations also struggle with the favored lowest price paradigm versus lowest total cost
measure. Supply chain optimization has moved from becoming a goal to becoming an
expectation. Leaner supply chains with supporting business cases are a requirement. A
higher degree of integration of purchasing and supply activities is necessary to effectively
manage costs.
Organizational Mandates. The starting point for business case development is the needs of
the organization as prioritized by management. A strong managerial mandate to undertake a
purchasing or sourcing activity supported by a viable business case must first have the
guidance and visible support of key managerial players in the organization. Otherwise, cross-
organizational support will be insufficient to even develop, let alone implement business case
recommendations. Developing a business requires timely information and data from business
units who in the absence of a managerial directive would be less inclined to give their time and
resources to gathering data and communicating the nuances of their business needs.
Spend Analysis. Once the cooperation of all the relevant stakeholders is accomplished, the
next step would be to scan the purchasing and supply chain domain, searching for
opportunities that improve leverage, capture synergies, and/or reduce total cost of ownership.
This involves collecting data regarding major spending activities and segmenting them by
categories and sub -categories. It also requires further segmentation of spend by geographical,
organizational and market areas to improve analysis. Spend data from key suppliers should
also be collected for comparison purposes. A reasonable approach is to then rank spending
activities by the amount of spend by product or service category. Then an additional analysis
is required to determine addressable spend versus spend that is too difficult to either capture
or address due to poor data quality, time constraint or organizational “buy-in” issues. Then the
addressable spend must be reviewed with stakeholders for validation purposes. The spending
activities must be ranked with consideration for customer requirements.
Market Analysis. Market trends impacting spending activities should be analyzed. Exchange
rates, inflation, deflation and other economic measures need to be evaluated to understand
spend in each market. Governments, restrictions, logistics, and hidden cost considerations
characteristic of each market should be noted. Price trends should be captured. The
competitiveness of each market should be assessed. Supplier versus buyer negotiating
leverage should be determined. What factors in the market analysis impact your business
case? How can they be captured or mitigated? Do you have a sufficient market intelligence
capability? Porter’s Five Forces analysis demonstrated below could be helpful. The following
chart was adapted from Porter, 1980.
Intensity of
Competitive Forces
Buying Power
Supplier Power Law Margins
Competitive Pricing Long Term Relationships
Long Term Relationships Value-Added Services Lack of Operational
US Near Capacity Planning
Available
Fragmentation of Spend
Threat of Substitutes
Rent vs Buy
Low Quality Substitutes
Supplier Analysis. Best-in-class suppliers should be sought. A list of major suppliers should
be obtained from your organization’s database rank ordered by spending levels with your
organization. This list should be augmented by supplier lists obtained from business units in
these effected markets. Manufacturers, consulates and an internet search can yield additional
suppliers. A concise RFI (Request for Information) can be sent to suppliers from these lists to
ascertain interest, capability, and “fit” for your sourcing requirements. This can be followed by
an RFP (Request for Proposal) which is sent to a subset of the suppliers rationalized from the
RFI analysis. The RFP can ask for more detailed information and should contain a “market
basket” of key spend items to determine competitiveness of responding suppliers and savings
capture against some current spend baseline. The RFP and market basket responses should
be scored, perhaps with a 50-50 weighing to develop a short list of suppliers you want for
negotiation purposes.
Supplier Negotiation and Selection. The short list of suppliers should be identified along
with negotiation (1) objectives, (2) targets, and (3) terms of agreement. The supplier who best
satisfies all three should be selected. This is usually an iterative process taking several rounds
of negotiation.
Implementation and Monitoring Plan. Savings captured and value added opportunities
need to be documented and presented to stakeholders in an acceptable format. “Hard” dollar
savings should be emphasized but “soft” savings need to be noted. A communications plan to
“roll-out” the benefits should be developed with a written business case distributed followed by
a face-to-face presentation to discuss tangible and intangible benefits and issues that may
arise. A transition plan and scorecard of key measures needs to be developed along with a
system to track the savings and value identified in the business case.
Structuring Business Cases. Structuring a business case should be clear, concise and
focusing on the benefits that are measurable a nd valued by stakeholders. The following model
is a useful illustration.
Table of Contents
1. Executive Summary and Supplier Recommendations
2. Specific Business Cases to the Organization’s Business Units
3. Additional Total Cost of Ownership (TCO) Opportunities
4. Service Levels/Non-Price Evaluation
5. Implementation
6. Request for Concurrence to Proceed
Note, the Executive Summary and Supplier Recommendations take place after business unit
needs assessment, a supplier’s capabilities evaluation and several rounds of negotiation.
Supplier selections are designated and savings are summarized.
Request for Business Unit Concurrence to Proceed. Finally, a request to review the
business case should be made with a specific response by time. The business case should
ask if the specific business unit will be a full participant of if they would like additional
information for evaluation. You should ask for any questions or proposed modifications.
Finally, the business case should request a single point of contact for implementation activities.
The business case should conclude with the person and address to respond to or call for
communication purposes. In conclusion, we have suggested a viable business case
development and presentation process. Applications of the framework will vary but we believe
it is pertinent to public and private organizations.
Synchronize team efforts. Before committing your ideas in report form, review with other
team members to ensure you have agreement on the presentation, approach, issues and
responses. Your proposal, analysis and plan of action will need a smooth, integrated flow of
thoughts.
Focus on the Salient. Do not restate material or points that people are familiar with
previously. You should restate information only if it is critical to your analysis. Your focus
should be on the key points that are more salient which will enhance the persuasion of your
business case. Leveraging, synergies, value streams, cost savings, resources, improvements,
technology sharing and process improvements, etc., should be highlighted.
Present information using graphs and charts. Charts, graphs, tables and other supporting
exhibits are very quick ways for others to judge the appeal and viability of your business case.
Some types of information are best presented graphically such as trends, savings over time,
production and process improvements, financial ratios, sensitivity analysis and return on
investment. It is easier for others to use their own “internal benchmarks” in judging your
business case when they can visualize the value representation you are making.
Exercise good form. Leave out unnecessary materials and make your business case as
concise and coherent as possible. “Less is more” is a good rule. Focus on making the
presentation as professional as possible. Appearances matter. Make it “reader-friendly” and
eye appealing with well organized and labeled sections easy to follow. Have other team
members and stakeholders pre-read for quality control and improvements.
REFERENCES
Dess, Gregory G., and G.T. Lumpkin, Strategic Management: Creating Competitive
Advantages, McGraw-Hill, New York, NY2003.
Porter, Michael E. Competitive Strategy, Techniques for Analyzing Industries and Competitors,
The Free Press, New York, NY, 1980