Shaw Industries, Inc.
Strategic Sourcing Approach
December, 2000
Private & Confidential: Not for use or disclosure outside of Shaw Industries, Inc.
Strategic Sourcing Approach
We plan to use a proven, structured process for identifying opportunities, conducting procurement analysis, supplier evaluation, selection and ongoing supplier management. The primary objective is to improve the value, service and price of purchased products and services. The time required for each category team to complete the process is dependent upon the complexity of the category and the commitment of needed resources:
IMPLEMENTATION FOCUS
Milestone I
Milestone II
Milestone III
CONTINUOUS COMMUNICATION
Form Category Team(s)
Information Gathering & Analysis
Profile the Category
Prepare and Conduct Negotiations
Draft
RFP’s
Evaluate Supplier Responses
Implement
Private & Confidential: Not for use or disclosure outside of Shaw Industries, Inc.
Information Gathering and Analysis
Work steps to be completed:
Gather dollar spend by supplier and by category from each location.
Utilize 1999 Spend Data gathered by the Fasttrack Team as a point of origin. Update Spend Data for 2000 as appropriate
Determine potential opportunities by category. Key selection factors include:
Categories that are candidates for standardization, specification changes, outsourcing, etc.
Categories where there are existing contracts
Number of current suppliers for each category
Last time the category was analyzed and "worked" by a buyer
Reverse logistics opportunities (., pallets, drums and other materials to be returned to suppliers)
Categories that can be bought on a local, regional or national basis
Sophistication of suppliers (., technology, process and people)
Market condition/environment of each category (., large number of suppliers, few number of suppliers, buyers market vs. sellers market, etc.)
Inventory and distribution strategy by category
Potential buying method (., procurement card, PeopleSoft purchasing, Ariba catalog, etc.)
Select categories for strategy development
Private & Confidential: Not for use or disclosure outside of Shaw Industries, Inc.
Form Category Team(s)
Work steps to be completed:
Select cross-geographic, cross-functional Category Team members. Category teams typically include five to eight members. Functional expertise includes, depending on the category:
Operations (., manufacturing, maintenance, engineering, etc.)
Finance
Purchasing
Logistics (., transportation, warehousing, etc.)
Legal
Confirm team member skill profile:
Knowledge of company culture, politics, etc.
Knowledge of manufacturing environment
Understanding of current buying practices
Team-player
Assign category team responsibilities
Create team orientation materials
Conduct category team kick-off meeting
Private & Confidential: Not for use or disclosure outside of Shaw Industries, Inc.
Profile the Category(ies)
Work steps to be completed:
Obtain detailed spend data and additional supplier suggestions from the plants
Review spend data for reasonableness and completion
Key data into excel spreadsheet
Identify and interview key category stakeholders and end-users to understand the:
Current supplier capabilities, performance, relationship, etc.
Special product, service and quality issues
Opportunity areas
Conduct additional research to identify other suppliers and their capabilities
Accumulate industry research to understand
General overview of the market
Major players, comparisons and positions in the supply chain
Industry economic and cost drivers
Private & Confidential: Not for use or disclosure outside of Shaw Industries, Inc.
Milestone I
Deliverables:
Categories Selected
Category Teams Formed
Category Team Kick-Off Meeting Held
Spend and Supplier Data Gathered
Industry and Supplier Research Completed
Private & Confidential: Not for use or disclosure outside of Shaw Industries, Inc.
Draft RFP’s
Work steps to be completed:
Draft RFP’s, including pertinent company operating information, usage data and service requirements
Conduct Negotiation Workshop #1 (Reviewing the RFP)
Finalize and Mail RFP’s
Hold a bidders conference for all qualified suppliers
Private & Confidential: Not for use or disclosure outside of Shaw Industries, Inc.
Evaluate Supplier Responses
Work steps to be completed:
Conduct Negotiation Workshop #2 (Identifying the Negotiables and Preparing Negotiation Worksheets)
Receive supplier responses
Follow-up on non-responses
Analyze quantitative and qualitative aspects of responses using Category Team ratings ()
Private & Confidential: Not for use or disclosure outside of Shaw Industries, Inc.
Milestone II
Deliverables:
Formal RFP’s Drafted, Finalized, Mailed, Received and Analyzed
Quantitative analysis and weighted rankings of RFP responses by supplier
Bidders Conference Held
Private & Confidential: Not for use or disclosure outside of Shaw Industries, Inc.
Prepare and Conduct Negotiations
Work steps to be completed:
Hold Negotiation Workshop #3 (First Supplier Cuts and Negotiation Role Play)
Prepare Supplier Communications and Internal Communications
Negotiation Session Invitations
Secondary Supplier Notification Letters
Plant Update on Supplier Selection Process
Conduct Negotiation Sessions
Hold Negotiation Workshop #4 (Final Vendor Selection)
Private & Confidential: Not for use or disclosure outside of Shaw Industries, Inc.
Implement
Work steps to be completed:
Design rollout of new program
Establish implementation plan and timetable
Finalize and roll-out performance measurement plan
Communicate and train personnel, as required
Measure performance
Anticipate problems
Identify and resolve service issues
Monitor internal processes
Monitor supplier performance
Document end-user requests and complaints
Facilitate relationships
Hold periodic supplier meetings to evaluate performance
Implement adjustments and improvements, as necessary
Private & Confidential: Not for use or disclosure outside of Shaw Industries, Inc.
Milestone III
Deliverables:
Mutually-beneficial supplier agreements
Evaluation of project results
Implementation approach and plan
Internal and supplier performance measurement system
Private & Confidential: Not for use or disclosure outside of Shaw Industries, Inc.
