Connections

Issue 2 • Volume 3 • April 10

CORPORATE UPDATES

Sourcing – A Team Effort
By Deron Banke, vice president of strategic sourcing

During 2009, OMG made a strong commitment to better understand and control the costs of products and services that we purchase from suppliers. Considering today's economic climate, this focus has become more critical to our success than ever before. As part of this commitment, last year, OMG established strategic sourcing teams to support each business. The purpose of these teams is to drive improved profitability and performance for OMG through the execution of "best-in-class" sourcing processes and purchasing practices. These sourcing professionals currently are being trained with the skills and tools needed to effectively lead and execute sourcing efforts, which will reduce supplier pricing while maintaining the needed levels of quality, service and availability. For OMG to be successful in these sourcing initiatives, it will take a team effort to drive down costs.

A key to OMG's sourcing approach is that our efforts begin and end with the involvement of stakeholders, or "subject matter experts." Many of us are stakeholders in some area. Stakeholders are employees that have practical, working knowledge of the business or technical requirements; understand the suppliers and their strengths or limitations, or simply have a vested interest in the cost, service, quality or availability of supply. Throughout the sourcing process, it is important for these stakeholders and the sourcing teams to work closely together to develop, execute and assess our sourcing strategies.

Strategy Development
The sourcing process, illustrated below, begins with frequent interaction between stakeholders and sourcing to identify savings opportunities and to perform analyses of business needs. The sourcing teams have assigned a lead to each of the various spend areas. Through the use of spend and market analysis tools, these lead sourcing professionals have begun working with key stakeholders to prioritize the areas with the most potential to generate savings and effective sourcing strategies. Specifically, the teams will work to:

Document the requirements (demand forecast, specifications, statement of work)
Identify and prequalify suppliers
Evaluate alternatives and agree on a strategy within the team

Program Development
Once a strategy has been developed, it is time to develop and implement a solution that meets the objectives of the strategy. In some cases, a traditional Request for Proposal format will be used to compare the pricing and capabilities of various suppliers. For other categories, more advanced sourcing tools, such as reverse auctions, will be conducted. It is critical that stakeholders become involved in the Program Development stages for the team to effectively evaluate alternatives, agree on the path forward, and communicate both internally and to our suppliers.

Program Execution
As a newly sourced program is established, it is vital that any early issues with its adoption or vendor problems are identified and resolved. Sourcing has the responsibility to work with our OMG locations and the vendor to communicate details of the program and monitor compliance on both sides. In the Program Execution phase of the sourcing process, the performance of the supplier is monitored and managed on an ongoing basis. The input and feedback from stakeholders regarding the supplier performance is key to the success of these programs. Providing opportunities for employees to supply input to the efforts underway will continue to be a focus of Sourcing.

Program Assessment
Finally, as any sourced program matures, stakeholders are essential to properly assess the benefits and challenges of a supply arrangement. Lessons learned are shared within Sourcing and with key stakeholders as future opportunities are identified. This way, future program strategy and development can benefit from the ever-changing business and commercial climate.

Success for our sourcing efforts will depend greatly upon our ability to work as a team throughout the sourcing process. Although Sourcing will help to drive the process and tools, we all have a responsibility to work together to establish and execute solid, coordinated strategies that meet business needs and save money along the way.

Sourcing graphic

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