The seven step sourcing process is a well-established method of procurement that many businesses find themselves implementing (whether consciously or not).
It provides a step by step method to structuring your procurement activities to reach category management heaven. However where problems exist in your supply chain it can also be “flipped” to provide a systematic method to interrogate your supply chain, providing a checklist of best practice to help hone in on the problems that you might be experiencing. And then help in repairing the process making it more workable for the future.
Let’s take a look at the 7 elements and how they might to a continuous improvement plan.
1/ Catagory assesment
2/ Supply market analysis
3/ Supplier search
4/ Strategy creation
5/ RFQ process / solicit bids
6/ Negotiation & contract
7/ Implement / Benchmark / Review
To begin with, let us remind ourselves how continuous improvement works.
1/ You experiment with a process
2/ You gather some data
3/ You measure yourself against your objective
4/ You look for improvement opportunities that can be made at each step
(p.s, if you’re not convinced by the marginal gains approach to read this https://hbr.org/2015/10/how-1-performance-improvements-led-to-olympic-gold)
So, for example, let’s consider a position where the supply chain isn’t functioning as expected. Deliveries to customers are running late and your QCD metrics are on a downward spiral – just where would you start.
Clearly, the first step is to ascertain exactly what the problem is. This will typically fall into one of 3 broad issues, Quality, Cost and Delivery. Let’s assume in our example that costs have spiraled.
So where does the 7 step program come in?
Straight away, due to the cost issue, we can discount several of the 7 steps, our attention might zone in on what requirement we sourced against, the sourcing process and contracualisation process.
We might review how the RFQ was structured, how the bids were weighted (for example was cost a priority or was the bid weighted more on Quality or capability?
We might also look at how the supplier was contracted. How have we found ourselves with escalating prices?
The key to this is using the seven stages to prompt questions that then act as a learning aid. What did the step set out to achieve, how well did we do against that?
Following a systemised process helps uncover improvements (no matter how small) that you can make to your category management process. Far too many businesses fail to capitalize on learning opportunities when things go wrong.
Let’s say that in our example during the RFQ and contracting process, there was no cover given for price escalation within the contract and the strategy was to sole source.
Straight away we have important feedback that we can use to hone the process next time.
By using the 7 step approach as a path to follow our “improvement investigations” it allows us to focus on the process, assess each stages performance and enable us to ask ourselves, what went wrong last time and what could we do better next time.