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Table of ContentsPreface............................................................................................... VII
1 Purchasing: between a rock and a hard place?................................ 1
1.1 Survey results: the state of purchasing in industry..........................2
Purchasing in industry...........................................................................3
Information systems support effective purchasing................................3
Targeted external communication with suppliers..................................4
Demand and capacity planning must be observed ..............................5
Adequate involvement in strategic issues ............................................5
Tailored strategies for each sourcing category need to be
strengthened.........................................................................................5
Inadequate staffing................................................................................6
Analytical deficits ..................................................................................6
1.2 A paradigm shift in purchasing........................................................7
Increasing concentration on the supplier market...................................7
Rising energy prices..............................................................................8
Hunger for resources on the part of emerging economies .............8
2 From four basic strategies to 64 methods ........................... 11
2.1 Manage spend ....................................................................... 15
Demand management............................................................. 16
Co-sourcing ........................................................................... 17
Volume bundling..................................................................... 18
Commercial data mining ......................................................... 19
2.2 Change nature of demand....................................................... 20
Risk management.................................................................... 20
Innovation breakthrough.......................................................... 21
Technical data mining ............................................................. 22
Re-specification....................................................................... 23
2.3 Leverage competition among suppliers...................................... 24
Globalization.......................................................................... 25
Tendering............................................................................... 26
Target pricing ......................................................................... 27
Supplier pricing review............................................................. 28
2.4 Seek joint advantage with supplier ............................................ 29
Integrated operations planning................................................. 29
Value chain management ........................................................ 31
Cost partnership ..................................................................... 32
Value partnership.................................................................... 32
3 Using the Purchasing ChessboardTM.................................... 35
3.1 A company’s fingerprint on the Purchasing ChessboardTM ........... 38
3.2 Example of applying the Purchasing ChessboardTM........................ 41
4 The Purchasing ChessboardTM............................................. 55
A1 Demand reduction .................................................................. 57
A2 Compliance management........................................................ 59
A3 Procurement outsourcing ......................................................... 62
A4 Sourcing community................................................................ 65
A5 Bottleneck management .......................................................... 68
A6 Vertical integration .................................................................. 71
A7 Core cost analysis ................................................................... 73
A8 Invention on demand .............................................................. 75
B1 Contract management............................................................. 80
B2 Closed loop spend management.............................................. 82
B3 Mega supplier strategy ............................................................ 84
B4 Buying consortia ..................................................................... 86
B5 Political framework management.............................................. 87
B6 Intelligent deal structure........................................................... 89
B7 Design for sourcing ................................................................. 91
B8 Leverage innovation network.................................................... 93
C1 Bundling across product lines................................................... 96
C2 Supplier consolidation ............................................................. 98
C3 Master data management........................................................ 99
C4 Cost data mining .................................................................. 102
C5 Product benchmark ............................................................... 104
C6 Composite benchmark .......................................................... 106
C7 Product teardown.................................................................. 110
C8 Functionality assessment ........................................................ 111
D1 Bundling across sites ............................................................. 114
D2 Bundling across generations................................................... 116
D3 Spend transparency............................................................... 117
D4 Standardization..................................................................... 120
D5 Complexity reduction........................................................... 122
D6 Process benchmark ............................................................ 125
D7 Design for manufacture ...................................................... 127
D8 Specification assessment.................................................... 129
E1 Global sourcing.................................................................... 131
E2 Make or buy.......................................................................... 134
E3 Supplier market intelligence ................................................. 136
E4 RFI/RFP process .................................................................. 139
E5 Visible process organization (VPO)....................................... 144
E6 Collaborative capacity management..................................... 149
E7 Supplier tiering ..................................................................... 151
E8 Value chain reconfiguration ................................................... 154
F1 LCC sourcing........................................................................ 156
F2 Best shoring.......................................................................... 160
F3 Reverse auctions ................................................................... 163
F4 Expressive bidding................................................................. 165
F5 Vendor managed inventory (VMI)............................................ 166
F6 Virtual inventory management ................................................ 169
F7 Sustainability management..................................................... 170
F8 Revenue sharing ................................................................... 173
G1 Cost based price modeling .................................................... 174
G2 Cost regression analysis......................................................... 176
G3 Price benchmark ................................................................... 180
G4 Total cost of ownership.......................................................... 181
G5 Supplier development............................................................ 184
G6 Total lifecycle concept ........................................................... 187
G7 Project based partnership....................................................... 190
G8 Profit sharing .......................................................................... 191
H1 Linear performance pricing .................................................... 193
H2 Factor cost analysis ............................................................... 194
H3 Unbundled prices.................................................................... 195
H4 Leverage market imbalances ................................................. 197
H5 Supplier fitness program ........................................................ 198
H6 Collaborative cost reduction ................................................... 201
H7 Value based sourcing ............................................................. 203
H8 Strategic alliance..................................................................... 205
5 Closing Remarks ....................................................................... 209
Appendix........................................................................................ 211
About the authors.......................................................................... 213