Strategic Sourcing

Introduction and Course Plan

Strategic Sourcing and Negotiation Skills by Sheikh Irfan (smikhi@yahoo.com)
 Introduction
1. Introduction of the Instructor
2. Introduction of the participants
3. Discussion on Course outline
a) Elective Course dynamics
b) Books
c) Quizzes
d) Assignments
e) Cases
f) Report and its presentation
4. Class Participation
5. Attendance and Class Discipline (Mobile and Laptop etiquettes)
6. Asking/responding questions
7. Mid Term Exam
8. Final Exam
Strategic Sourcing and Negotiation Skills by Sheikh Irfan (smikhi@yahoo.com)
 Introduction….. Contd.
9. CR/FB Page/WhatsApp Group
10. Tips for Exams. (How to attempt Questions)
11. Counseling Hours (before and after every class by appointment)

Comments/Questions of Students:

Strategic Sourcing and Negotiation Skills by Sheikh Irfan (smikhi@yahoo.com)

 Course Learning Objectives and Outcomes
Course Learning Objectives
1. To develop an understanding of the Procurement process in general and its strategic importance in
overall supply chain.
2. To understand tools, techniques and best practices in strategic sourcing
3. To understand the role and importance of various players, internal and external, and how to handle
those players.
4. To understand and master the process of Order issuance and execution and post receipt activities.
5. To understand the concept of Global Sourcing and its comparison with local sourcing
6. To understand the dynamics of Negotiations
Course Learning Outcomes
1. To be able to explain the difference in purchasing, procurement and strategic sourcing.
2. To show the understanding of principles, process and best practices in strategic sourcing management
3. To explain how various parties/players affect the sourcing process
4. To understand various environmental, ethical and social issues in sourcing
5. To develop team work, communication and interpersonal skills
6. To become a self-learner in the field of sourcing and negotiations skills
7. To develop decision making and analytical skills
8. To be a good negotiator in various purchasing scenarios
Strategic Sourcing and Negotiation Skills by Sheikh Irfan (smikhi@yahoo.com)
 Supply Chain Management and Sourcing

• SCM: A supply Chain consists of all parties involved, directly or indirectly, in fulfilling a
customer request.

• Sourcing: Where does it fall in the overall SCM Picture?

Strategic Sourcing and Negotiation Skills by Sheikh Irfan (smikhi@yahoo.com)

 Purchasing - Definitions

Classical Definition :To buy materials of the right quality, in the right quantity, from the right
source, delivered to the right place at the right time at the right price.

Criticism : “Right is a very relative term and some “rights” may only be obtained
by trading off some other “rights”. It also indicates that Purchasing is a
transactional and tactical activity rather than a strategic activity.

Strategic Sourcing and Negotiation Skills by Sheikh Irfan (smikhi@yahoo.com)

 Strategic Sourcing Definition

“The Process in an Organizational Unit, either as a function or

as part of an integrated Supply Chain, responsible for
procuring or assisting Users to Procure in the most efficient
and effective manner, required supplies at the right time,
quality, quantity and price and the management of Suppliers,
thereby contributing to the competitive advantage of the
Enterprise and the achievement of its Corporate Strategy”

Strategic Sourcing and Negotiation Skills by Sheikh Irfan (smikhi@yahoo.com)

 Elements of Strategic Thinking

System
Perspective

Hypothesis
Intent Focus
Driven

Strategic
Thinking

Timely Intelligent
Thinking Opportunism

Strategic Sourcing and Negotiation Skills by Sheikh Irfan (smikhi@yahoo.com)

Purchasing/Procurement/Strategic Sourcing

• Purchasing: A simple Transactional function implying acquisition of

Goods or Services in return of something of value.

• Procurement: A relatively broader range of processes to obtain

necessary goods and services to run the organization. Includes activities
like locating suppliers, supplier selection, price and terms negotiations,
Order and Contract Management, Relationship Management, etc.

• Strategic Sourcing: Goes higher than Procurement in Management

Level. It covers topics like value addition, Risk Management, Supplier
Alliances, Spend Management, etc.

Strategic Sourcing and Negotiation Skills by Sheikh Irfan (smikhi@yahoo.com)

 Integrated Purchasing
Like Supply Chain Management, Purchasing is also an well-knit process which integrates with other
functions of an organization.

1. Purchasing and Logistics/Distribution

2. Purchasing and Finance

3. Purchasing and Marketing

4. Purchasing and HR

5. Purchasing and Design/Operations/Customer Service

Its always “possible” to get a lower Price, but its not always “good” to get a lower price
(Total cost Concept of Working with Suppliers)

Strategic Sourcing and Negotiation Skills by Sheikh Irfan (smikhi@yahoo.com)

 Total Cost Concept in Purchasing
Total Cost associated with Working with suppliers
1. Quality
2. Delivery Performance
3. Maintenance Cost
4. Training needed to use suppliers’ Products
5. Payment Terms
6. Tooling
7. Freight/Freight Forwarding
8. Packaging
9. Duties/Customs
10. Insurance
11. Warehousing
12. Ordering

Strategic Sourcing and Negotiation Skills by Sheikh Irfan (smikhi@yahoo.com)

 Adding Value by Purchasing Personnel
Eight Ways by which purchasing personnel can add value to their Organization

1. Leveraging Purchases
2. Managing Total Cost of Supply Chain
3. Conducting Value Analysis
4. Reducing Administrative Process
• Processing of PO
• Checking Acknowledgement
• Matching Order, Receipt, Invoices
• Inspections Suppliers’ Products
• Dealing with Poor Supply Quality
• Expediting Suppliers’ Deliveries
5. Selecting the best suppliers
6. Certifying Suppliers
7. Taking Corrective Actions
8. Receiving inputs from Suppliers

Strategic Sourcing and Negotiation Skills by Sheikh Irfan (smikhi@yahoo.com)

 10 stage Sourcing Process
1. Identify or re-evaluate needs
2. Define/evaluate user’s requirement
3. Make or buy decision
4. Type of purchase (rebuy/routine, modified rebuy or new buy)
5. Market Analysis
6. Identify possible suppliers
7. Pre-screen/Evaluate possible suppliers
8. Choose Supplier/Place PO/Follow up
9. Deliver product/perform service
10. Post purchase/performance evaluation
Strategic Sourcing and Negotiation Skills by Sheikh Irfan (smikhi@yahoo.com)