The Purchasing Chessboard (eBook)

Christian Schuh is the leader of A.T. Kearney’s European Procurement Practice and founder of the firm’s high tech office in Taipei. He is based in Vienna, Austria. Since joining the firm in 1995, he has led an array of projects for clients in the automotive, construction equipment, defense, high tech, packaging, and steel industries in Austria, China, France, Germany, Russia, Taiwan, the United Kingdom, Ukraine, and the United States. His areas of expertise include strategic sourcing, product development, and organization and he has written several books, monographs, and articles. Before joining A.T. Kearney, he worked for Unilever for several years. Christian studied aeronautical engineering and earned a doctorate degree in business administration from the Graz University of Technology in Austria. He lives in the historic city center of Vienna. Joseph L.  Raudabaugh is the founder and global leader of A.T. Kearney’s Procurement & Analytic Solutions Practice and is based in Chicago. Since joining the firm in 1984, he has led projects for clients in the brewing, construction equipment, consumer products, direct marketing, food ingredients, healthcare, industrial products, pharmaceutical, and specialty retail industries in North America, China, Europe, India, Japan, and South America. His areas of expertise include supply management, strategy, and organizational development, and he is the author of various monographs and articles. Joe is the co-founder of A.T. Kearney’s Student Lab, a program that connects more than 45 clients with students and faculty from Carnegie Mellon University, the University of Chicago’s Booth School of Business, the University of Michigan’s Ross School of Business, MIT, and UCLA’s Anderson School of Business to address operations and strategic business projects in an experiential learning model. Before joining A.T. Kearney, Joe worked for Air Products and Chemicals for several years. He studied economics and operations research at North Carolina State University and earned a master’s degree in business administration from the University of Chicago Booth School of Business. Robert Kromoser has been with A.T. Kearney since 1998. He is based in Vienna, Austria, but gained most of his consulting experience during international projects in Germany, Switzerland, Belgium, Denmark, Netherlands, France, Italy, Great Britain, Taiwan, and the United States. He is a member of the leadership team of A.T. Kearney’s Procurement & Analytic Solutions Operations & Performance Transformation Practice with a focus on strategic sourcing, procurement transformation, and supplier risk management. He has led multiple projects in the automotive, construction equipment, building materials, mechanical engineering, and retail industries. In several studies, he analyzed the role of strategic sourcing and procurement as a value-adding factor and he is the author of several books and articles on procurement. Robert studied business administration at Vienna University of Economics and Business Administration in Austria and Carnegie Mellon University in the United States. He lives near Vienna’s famous baroque park, Augarten.Michael F. Strohmer is a member of A.T. Kearney’s Operations Practice and leader of the European raw material competence team. He is based in Vienna, Austria. Since joining the firm in 2001, he has led projects with a broad range of international clients, mainly post-merger. His work encompasses the utilities, automotive, defense, consumer goods, packaging, and steel industries. He is an expert in raw material strategies, procurement transformation, post-merger management, and large-scale capex projects. He has published several books and articles and is a frequent speaker at international conferences. Michael earned a doctorate degree in business administration and law. He lives in Austria’s picturesque lake region near Salzburg. Alenka Triplat is a member of A.T. Kearney’s Operations Practice. Since joining the firm in 2003 in Vienna, Austria, she has led multiple projects on supply management topics in the construction equipment, packaging, and steel sectors. She has worked with international clients based in Austria, Germany, Italy, and Eastern Europe and spent long periods of time working and living in the United States. She is an expert in supply management, including negotiation strategies and global sourcing. She is a trainer in sourcing strategies and negotiations and has published multiple articles on these topics. Alenka studied economics at the University of Ljubljana in Slovenia and business administration at Vienna University of Economics and Business Administration in Austria. She lives in Vienna and Ljubljana.   Jim Pearce is the leader of A.T. Kearney’s European Operations & Performance Transformation Practice. Based in London, he joined the firm in 2001 after earning his MBA from INSEAD. His focus is on operational, organizational, and merger and acquisition projects, largely in extractive and heavy industries such as oil and gas and mining, and he is a regular conference speaker on these topics. Jim developed A.T. Kearney’s global capex benchmarking survey, ExCap, and has led multiple capex optimization projects. A geologist by profession, he started his career in gold mining in Ghana before joining Schlumberger and working on oil rigs around the world from Saudi Arabia to Venezuela, Alaska to India, Bahrain to Brazil. He now enjoys a quieter life in the countryside outside London with his wife and three young sons.

Preface 6
Table of Contents 10
1A CEO who thinks like a CPO who thinks like a CEO 17
Can Tim Cook be cloned? 20
Get the C-suite aboard 22
2From four basic strategies to 64 methods 24
2.1Manage spend 28
Demand management 29
Co-sourcing 30
Volume bundling 31
Commercial data mining 32
2.2Change the nature of demand 32
Risk management 33
Innovation breakthrough 34
Technical data mining 35
Re-specification 36
2.3Leverage competition among suppliers 37
Globalization 37
Tendering 38
Target pricing 39
Supplier pricing review 40
Integrated operations planning 42
Value chain management 43
Cost partnership 44
Value partnership 44
3Using the Purchasing Chessboard® 46
3.1A company’s fingerprint on the Purchasing Chessboard 49
3.2Example of applying the Purchasing Chessboard 52
4The Purchasing Chessboard® 64
?Demand reduction 66
?Compliance management 69
?Procurement outsourcing 71
?Sourcing community 75
?Bottleneck management 78
?Vertical integration 81
?Core-cost analysis 83
?Invention on demand 85
?Contract management 90
?Closed loop spend management 92
?Mega supplier strategy 95
?Buying consortia 97
?Political framework management 98
?Intelligent deal structure 99
?Design for sourcing 102
?Leverage innovation network 104
?Bundling across product lines 107
?Supplier consolidation 109
?Master data management 110
?Cost-data mining 113
?Product benchmark 115
?Composite benchmark 116
?Product teardown 120
?Functionality assessment 121
?Bundling across sites 123
?Bundling across generations 126
?Spend transparency 127
?Standardization 129
?Complexity reduction 131
?Process benchmark 134
?Design for manufacture 136
?Specification assessment 138
?Global sourcing 140
?Make or buy 142
?Supplier market intelligence 145
?RFI/RFP process 147
?Visible process organization (VPO) 152
?Collaborative capacity management 157
?Supplier tiering 159
?Value chain reconfiguration 162
?LCC sourcing 164
?Bestshoring 167
?Reverse auctions 170
?Expressive bidding 172
?Vendor-managed inventory (VMI) 174
?Virtual inventory management 176
?Sustainability management 178
?Revenue sharing 181
?Cost-based price modeling 184
?Cost-regression analysis 187
?Price benchmarking 193
?Total cost of ownership (TCO) 195
?Supplier development 198
?Total life-cycle concept 201
?Project-based partnership 203
?Profit sharing 205
?Linear performance pricing 206
?Factor-cost analysis 208
?Unbundled prices 209
?Leverage market imbalances 212
?Supplier fitness program 213
?Collaborative cost reduction 216
?Value-based sourcing 218
?Strategic alliance 219
5The way forward 222
5.1Application patterns 223
Overview of cross-functional capabilities 224
Core procurement cluster 225
Controlling cluster 225
Globalization cluster 226
Entrepreneurship cluster 226
IT cluster 226
Statistics cluster 227
Manufacturing cluster 227
Engineering cluster 227
Supply chain cluster 227
Corporate strategy cluster 228
Leveraging analytics 228
5.2Innovative new ways of using the Purchasing Chessboard 229
Applying in reverse, as a creativity tool when developing a commodity strategy 229
Developing a vendor management strategy for large capex programs 230
Planning and executing strategic corporate moves 231
Managing dynamic product life cycle 232
Return on Supply Management Assets (ROSMA) 234
Spend coverage 237
Velocity 237
Category yields 238
Compliance 238
Additional benefits 238
6How to build a winning Purchasing Chessboard® team 242
Building a winning team inside procurement 243
Building a winning team with business stakeholders 245
Building a winning team with suppliers 247
7Epilogue: Reflections on sales and marketing 248
Understand where you are on the Purchasing Chessboard 249
How to deal with a center position 249
How to deal with a lower left-hand corner position 250
How to deal with an upper left-hand corner position 250
How to deal with a lower right-hand corner position 251
How to deal with an upper right-hand corner position 251
Closing remarks 253
Appendix 254
About the authors 256