Category Management Toolkit

Sourcing Strategies and Options

 Sourcing Strategies and Options Summary

What is a Sourcing Strategy?

A Sourcing Strategy is the organisations’ agreed road map for managing a category, and
may range from short-term tactical quick win plans to long-term category procurement
strategies.

The nature of the category will determine whether a sourcing strategy is required.

Where does it fit in with Category Management?

Developing a strategy
Plan and Implement Strategy

What is included in this guide?

Sourcing Strategies
Quick Win Plans
Short to Medium (Tactical) Sourcing Plans
Long Term Source Plans

Which processes does the tool apply to?

Strategic Sourcing

Which other tools link to this guide?

Source Planning
Options Generation / Breakthrough Thinking
Quick Win Planning
Creating a Vision
Business Requirements / Quality, Cost, Logistics, Development, Management
Information (QCLDM)
Sourcing Strategies and Options

Sourcing Strategies
The Strategic Sourcing process is an iterative cycle, in which a number of distinct stages
of maturity can be identified. Strategic Sourcing teams will go through several stages of
development - this is normal, as continual iteration is part of the Strategic Sourcing
process.

The level of maturity ranges from development of short-term tactical plans to long-term
sourcing strategies. Each of these stages is described in more detail below.

Depending on the nature of the category, it may never be necessary to develop a 3-year
strategy. For example, categories with leverage spend characteristics in mature markets
will probably only ever need a set of short/medium term Source plans or tactical plans.
However, categories with technical and strategic characteristics will need longer term
development plans and strategies. Sourcing may not always involve a procurement
activity e.g. if there are existing, effective contract vehicles in place.
Effectiveness/value

Procurement
strategies

Long terms/
advanced source
plans

Short /medium
term source plans

Sourcing action
plans - quick
wins

0 6 12-18 18-24 24-36

months

Quick Win Plans

A category that has not previously been managed by purchasing will start off the process
with a quick win plan (i.e. easy opportunities that can be delivered in a 4-6 month period)
whilst gathering facts and data with which to create a longer term plan.

Quick Win plans are actions, typically with existing sources of supply, e.g. negotiations,
simple specification changes, consolidation of volumes etc, and should be a one-sheet
4

milestone summary – supported with a detailed action plan. Each owner of a milestone
should have their own action plan. Quick wins may also arise in second and third cycles of
Strategic Sourcing cycle.

Short to Medium (Tactical) Sourcing Plans

After the first or partially complete cycle of Strategic Sourcing the resulting plan may be a
tactical sourcing plan – stretching out 12 months maximum.

A tactical sourcing plan is a simple summary of which suppliers the team has opted for,
the allocation of business to each supplier and the cost improvement plan associated
with each supplier. The summary sheet is backed up with: -
• An executive summary and simple business case for the sponsor
• A milestone plan and detailed action plan to deliver the source plan. Each owner of
a milestone should have their own action plan
• A QCLDM milestone plan
• Detailed appendices of the interpretation of facts, data and analysis conducted by
the team.
Excluding appendices the tactical source plan should be no more than 10 pages

Long Term Source Plans

After the first or second cycle of Strategic Sourcing the resulting plan may be a long term
source plan – stretching out 12-24 months maximum.

A simple strategy/series of tactics will have been agreed with the business to
recondition the market place e.g.
• Significant changes to specifications and volume consolidation
• Reinvestment in new sources of supply
• Response to policy changes
• Response to organisational restructuring
• Significant cost improvement targets –15 - 20%

A long term/advanced source plan comprises

• An executive summary and business case for the sponsor – focussing on risks!
• Forecast cost improvement plan - 24 months
• Summary of which suppliers the team have reviewed, the current allocation of
business to each supplier and the potential cost improvement plan associated with
each supplier over 24 months
• A milestone plan and detailed action plan to deliver the source plan. In the
collaborative model these are the category initiatives. Each owner of an initiative/
milestone will have their own action plan
• QCLDM milestone plan
 5

• Detailed appendices of the interpretation of facts, data and analysis conducted by

the team.
Excluding appendices the long term source plan should be no more than 20 pages as a
guide

Sourcing Strategies
After the first or second cycle of Strategic Sourcing it is appropriate to develop a strategy,
stretching out 12-36 months, for categories which need development over the longer term.
This would generally only be used for items in the Strategic and Technical quadrants (see
Portfolio Analysis)

A full strategy will have been agreed with the organisation / collaborative partners to
reshape the market place e.g.
• Fundamental changes to specifications and volume consolidation
• Reinvestment in new sources of supply in global locations
• Significant breakthrough improvements +30%

A sourcing strategy comprises:

• An executive summary and business case for the sponsor – focussing on risks!
• Forecast cost improvement plan - 36 months
• Summary of which suppliers the team has selected, the allocation of business to
each supplier and the cost improvement plan associated with each supplier over 36
months.
• A milestone plan and detailed action plan to deliver the source plan. Each owner of
a milestone should have their own action plan
• QCLDM milestone plan
• Detailed appendices of the interpretation of facts, data and analysis conducted by
the team.

Excluding appendices the category strategy should be no more than 30 pages as a guide.
 About OGC
OGC - the UK Office of
Government Commerce -
is an Office of HM Treasury.
The OGC logo is a registered trademark
of the Office of Government Commerce.
OGC Service Desk
OGC customers can contact the central
OGC Service Desk about
all aspects of OGC business.
The Service Desk will also channel
queries to the appropriate second-line
support. We look forward to
hearing from you.
You can contact the Service Desk
8am - 6pm Monday to Friday
T: 0845 000 4999
E: ServiceDesk@ogc.gsi.gov.uk
W: www.ogc.gov.uk
Press enquiries
T: 020 7271 1318
F: 020 7271 1345
This document is printed on material comprising 80
Office of Government Commerce, 1 Horse Guards Road, London SW1A 2HQ per cent post consumer waste and 20 per cent ECF pulp.

© Crown Copyright 2006

Service Desk: 0845 000 4999 E: ServiceDesk@ogc.gsi.gov.uk W: www.ogc.gov.uk