COURSE OUTLINE

YEAR: 2017 | TRIMESTER: 4

STRATEGIC SOURCING
MBA BATCH: 2017-19 / TRIMESTER - IV
DEPARTMENT OF MANAGEMENT, BANGALORE CAMPUS
AMRITA VISHWA VIDYAPEETHAM (UNIVERSITY)

INSTRUCTOR AND CONTACT INFORMATION

Instructor: T.K.Ramasubbu
E-Mail: [email protected]
Telephone No: 080-25456874/9880182291
Address: #36, VI Cross, Nanjappa Garden, Kalyannagar PO. Bangalore 560043

INTRODUCTION

Strategic sourcing is an approach to supply chain management that formalizes the way information
is gathered and used so that an organization can leverage its consolidated purchasing power to find
the best possible values in the marketplace.

Strategy Sourcing is an approach to procurement whereby the business needs of the organization are
matched with the supplier market. It is much more than simply centralizing procurement. The
approach is founded on a detailed understanding of both the spend profile of the organization as
well as of the supplier market. This understanding is continually updated in order to deliver ongoing
improvements to the organizations sourcing and procurement performance

A method of managing procurement processes for an organization in which the procedures,

methods, and sources are constantly re-evaluated to optimize value to the organization.
Strategic sourcing, which is considered a key aspect of supply chain management, involves
elements such as examination of purchasing budgets, the landscape of the supply market,
negotiation with suppliers, and periodic assessments of supply transactions.

It's a constant process of evaluating your own requirements and what's available in the market at
any given time. That's strategic sourcing in a nutshell - making sure you're getting superior value
on supplies and services and also making sure you've optimized your internal purchasing processes.
You have to consider your budget (just like at home), survey the landscape of potential suppliers,
and negotiate the terms of the purchase.

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Strategic sourcing is part of internal supply chain

management

Supply Chain Management

Strategic sourcing is one aspect of supply chain management (SCM), which encompasses the
whole flow of bringing in materials from suppliers and managing the use of information and
finances in order to get a product out the door. Sourcing is a collaborative effort between a business
and their partners - there must be coordination in generating supply orders, order-taking at the
partner's end, and order fulfilment. Supplies must be brought in at the appropriate time and in the
correct quantity to maintain a product flow to consumers. Too much supply inventory can result in
unneeded costs, and not enough inventory may delay a product's availability to customers.
Collaboration can include using software to communicate parameters to your upstream
partners (suppliers) and downstream partners (clients). For mid-to-large size businesses,
sourcing information flow can be a part of enterprise resource planning (ERP) systems, which
gather information from various parts of the business to give management insight into activities and
aid them in developing a strategy.

COURSE OBJECTIVE

OBJECTIVES:
In the Supply Chain profession one gets to hear and read a great deal of information about strategic
sourcing. It is one of the most powerful tools available to supply chain professionals and
organizations to bring significant bottom line results of the company. As the procurement
profession has evolved from the Purchasing Agent to Supply Chain mentality, strategic sourcing
culminates the transformation as a collaborative process that is producing immediate and significant
results required by the top management.

Strategic sourcing is the organized, collaborative and structured process of critically analyzing an
organization’s spending across locations with select suppliers and using this information to make
business decisions about acquiring commodities and services more effectively and efficiently. This
process helps Organizations to optimize performance, minimize price, increase achievement of
socio-economic acquisition goals, evaluate total life cycle management costs, improve vendor
access to business opportunities, and otherwise increase the value of each dollar spent. Strategic
sourcing is a proven best practice and reflects how the Sourcing Department acquires goods and
services.
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Strategic sourcing is organized since some type of methodology or process is needed; it is

collaborative since one essential requirement for any successful strategic sourcing effort is that of
getting functional elements other than Procurement involved in the decision making and evaluation
process. Used to create knowledge and value in the customer – supplier interface.

The objectives of this course are to help the student develop knowledge and skills in the areas of
purchasing and materials management, an increasingly important element of modern global
commerce.

This course aims to equip the participants, with the knowledge and techniques of purchasing as well
as the legal issues affecting purchasing, the principles and practical knowledge required to plan and
control inventory, a working knowledge on the principles and techniques of good sourcing practices
for effective management of their organizations.

METHODOLOGY:
The program combines with a blend of formal instructions, interactive discussions, case
studies, audio-visual presentation, practical demonstrations and written assignments, Role
Plays intended to allow students to solve practical problems

LEARNING OUTCOMES

Upon completion of this course, students will be able to complete the following key tasks:
• Recognize the Fundamentals of Strategic Sourcing Theory and Practice
• Develop and Implement commodity Strategy
• Organize Strategic Supply Planning
-Employ Tools for Supply Management
• Understand and use the Supplier Perception Matrix
• Know how to manage Supplier Selection and Relationship Management
-Develop and use Spend Analysis/Portfolio Analysis
• Conduct -Negotiation and Contract Award using
-Cost & Price Analysis
-Goals and Metrics
• Manage Supplier Performance Management
• Implement e-procurement initiatives

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COURSE DESCRIPTION
In today’s fast moving, competitive environment, all major projects need to be aligned with corporate
objectives. Sourcing has the potential to deliver significant benefits, but large projects require substantial
effort and often result in considerable change in the organisation. These projects demand resources and
management attention that, depending on corporate priorities, may be better directed elsewhere. Good
contracts often flounder because alignment with the corporate operating model is not adequately addressed.
All of these factors should be considered prior to initiating sourcing activities. Strategic sourcing is an
instrument for flexibility.
Neither a rigid decision nor a static contract, sourcing should and increasingly is being viewed as a
“topdown” tool to connect strategy with implementation. It means moving away from providing services, on
a function-by-function or business-unit-by-business-unit basis, to managing services on a company-wide
scale. Designing and implementing service propositions that capture enterprise scale and maximize synergies
is not easy and requires that a company addresses interconnected needs and capabilities across often far-flung
global operations. However, companies across all industries that can move in this direction will enjoy better
performance and cost efficiencies than organisations which persist with a function-by-function
approach and redundant, subscale services.

The strategic approach results in an alignment between sourcing options and business objectives,
and leads to more significant and sustainable benefits for the company. This program will describe
strategic sourcing, propose a standard set of definitions, explain what distinguishes strategic from
tactical sourcing, and indicate why we think that the former approach can be a significant
differentiator for companies as they strive to enhance their competitive advantage.

sourcing goes beyond the simplistic formula of ‘outsourcing what isn’t core’. Instead, a strategic
approach to sourcing connects the company’s operational base to its business aspirations. It ensures
that the service delivery model is not only aligned with, but can also help to drive forward, the
critical operational and information technology (IT) aspects of the business strategy. This approach
means going back to basics by considering the direction in which the business is heading and using
sourcing options to help take it there.

Many executives fall into the trap of thinking of sourcing initiatives as merely tactical or technical
projects rather than long-term, significant strategic programmes that fundamentally change the
profile of the organisation. It is vital that companies do not underestimate the strategic value of their
sourcing as the foundation for on-going success.

REQUIRED COURSE MATERIALS AND READINGS

Suggested Readings/ References:

1. Sourcing and Supply Chain Management—5e, Monzca, Handfield,
Guinipero, Patterson, Cengage India
2. Purchasing And Supply Management—Leenders, Johnson, Flynn and
Fearon, Tata McGraw Hill
3. World Class Supply Management--Burt, Dobler, Starling, Tata
McGraw Hill

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OPTIONAL COURSE MATERIALS & READINGS (CASES, ARTICLES, REPORTS ETC)

Articles from the Internet.

HBR case: How Chrysler created an American Keiritsu

EVALUATION CRITERIA

Components and Weights

Components Weightage (%)
Component 1 quiz 20%
Component 2 presentations 20%
Component 3 individual assignments 20%
End term 40%
Total 100%

ACADEMIC DISHONESTY
It is the responsibility of each student to become acquainted with and to uphold the ideals set forth
by the university. Cases of academic dishonesty shall be processed in accordance with the
Academic Integrity Policy prescribed by the university. For any clarification, contact the
administration department

DETAILS OF SESSION: TENTATIVE COURSE SCHEDULE

SESSION ASSIGNED READING,

WEEK TOPICS TO BE COVERED CASE DISCUSSION,
NO.
ASSIGNMENTS

Day 1& 2 Session 1to 3 Introduction to Purchasing and supply chain Recommended text
Management. Chapters 1, 2, & 3
Purchasing and supply Management Additional reading

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Role of purchasing in organizations Ratio of RMC to

Supply chains and value chains selling price –a view
Evolution of Purchasing to Supply Management across industries.
then to Sourcing management Assignment # 1.
(Internal evaluation)
Session 4to 6 Sourcing Policies and Procedures Recommended text.
Procurement categories Chapter 4, 6, 9
Raw Materials Assigned Case :Spartan
Components
Heat Exchangers,
Day 2&3
Semi-Finished Products
Finished Products (How to deal with
MRO items strategic changes in a
Product support Items dynamic environment)
Services ( Internal evaluation)
Capital Equipment
Session7to9 Purchase Management, Recommended text.
Introduction to sourcing fundamentals, Chapters 5 & 6
The Sourcing Process Assigned case.
Sourcing objectives
Purchase Portfolio
Responsibilities of Sourcing
Relationship with other Departments Analysis. United
Cross Functional Teams in Sourcing Express. (development
Price and Pricing Issues of a frame work for
Day 4&5 Strategic Sourcing, sourcing)
Aligning supply management and Case: Inventory
enterprise objectives Octopus, Grillrite
Types of supply management strategies ( Internal evaluation)
Evolving sourcing strategies
Portfolio management.
Management of inventories
Supply management organization and
structure
Session10to14 Supplier selection, Management and Recommended text.
Development/ Outsourcing Chapter 7
Supplier evaluation and selection process Assigned cases. SRM.
Key supplier evaluation criteria Insourcing/Outsourcing
Developing a supplier evaluation and selection Decision. Case: Farm
survey Equipment Ltd. C. J.
Day 5,6,7
Reducing supplier evaluation and selection
Industries. Aroma
cycle time
Industries. X
Integrating supply management, engineering,
and suppliers to develop new products and
Corporation and B
services Steel.
Supplier performance measurement Sourcing Dilemma

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Rationalization and optimization ( Internal evaluation)

Supplier development
Managing supply base risk
Session15to18 Purchasing Contracts and Negotiations Recommended text.
Negotiation framework Chapters 13 & 14
Negotiation planning Assigned cases.
Power in negotiation Negotiations, IBN,
Concessions Preparation of
Negotiation tactics: trying to reach agreement
Contracts/Non-
Win-win negotiation
disclosure Agreements.
International negotiation
Day 8&9 Comprehensive global negotiation
Case: Kaiser Optics.
skills and enhanced cultural National Institute of
understanding Immunology. ABC
Impact of electronic media on negotiations Furnishings.
Contract Management DPL/Filter Inserts-Role
Elements of a contract Play. (Internal
Types of contracts Evaluation)
Long-term contracts in alliances and
partnerships
Session19to21 Tools and techniques; Recommended text.
Value Analysis, Value Engineering, Process Chapter 12 & 18
Management, Purchasing ( Internal evaluation)
Performance Measurement
(supplier performance
Purchasing and supply chain performance
measurement and evaluation monitoring, supply
Day 10
&11 Developing a performance measurement strategies)
and evaluation system
Outsourcing
e-procurement
Evolution of e-SCM systems
E-sourcing basics
Session22to24 Quality in MM, Recommended text.
Factors affecting supply management’s Chapter 8, 11
role in managing supplier quality Managing Supplier
Supply quality management using a TQM Quality, International
Day 11
perspective Purchase Price
&12
Global Sourcing Determination. Case:
Why Global Sourcing? Bangalore Agricultural
Developing a worldwide sourcing program and Complex Parts
Moving to a global sourcing philosophy ( Internal evaluation)

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**Note: Faculty should give tentative schedule of all the 24 sessions and Topics to be covered along
with the cases and assignments if any. (If required, changes can be done at later stage)
** 1 Session= 75 Min. (1.15hr)

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