Sourcing strategy - Telecom

1.

Sourcing Group :-
Scope
• Sourcing group:
Telecommunications
• Objective: Contribute to
Kellogg Russia growth goals by
sustaining 4,5% return in savings
• Strategy: Leverage
• Spend & volume: 14 000 000 rub
• Supplier landscape: Rostelecom,
TTK, Vympelcom, MTS, Megafon,
Orange, Intercall, AT&T
• Gemstone left or right: left
• Timeframe: 3 years

2.

Profile The Sourcing Group
CHARACTERIZE THE SG
Volume
Purchasing
Process
Price
SG
Business Requirements
Constraints/
Restricts
1.07
Opportunity

3.

SG Opportunity Assessment
Secondary Area of Focus
Primary Area of Focus
28% Of
Managed
Spend
Mobile telecom
Audioconf
Landline telecom:
local/regional calls
VPN
Landline telecom:
intercity/
international calls
Internet
Special Efforts
Explore Alternate Solutions
Continuous
Improvement
Innovation
Supplier Risk
Aversion
Resource
Constraint
Right size
the supply
base
Supplier
consolidation
Policy for
Mobile and
Landline
telecom

4.

SG How Kellogg See’s
Supplier Categorization
High
THE STRATEGY FOUNDATION
LEFT HAND SIDE
RIGHT HAND SIDE
Strategic
Leverage
Mobile telecom
VPN
Business
Impact
maximise supply performance; close
supplier management
Landline
telecom:
maximise value
for money
intercity/
international calls
Audioconf
Non Critical
Internet
Bottleneck
Landline telecom:
loca/regional calls
simplify/ minimise involvement
Low
ensure supply security & quality
Supply Market
Complexity
High

5.

SG Porter’s 5 Forces
SUPPLY MARKET COMPLEXITY ANALYSIS
Supplier Bargaining
Power
Vendors tend to offer
High
differentiated services
integrated into customer’s
internal processes to move
from competition zone to
monopoly zone.
Vendor migration requires
great efforts, siginificant one
time expenses and means
temporary discomfort or for
clients
Digital landline telecom,
cellular and landline systems
intergration, mobile intercity
calls via landline telecom,
Skype vs landline telecom,
right proportion of
cellular/landline calls, aerial
telecom vs landline
Internet/VPN, Private VPN
via Public Internet)
Potential Entrants High
Scope
Moderate
Low
Moderate
Low
Industry
Competitors
Monopoly of
RosTeleCom for
underground
mains providing
best telecom
service level holds
driving cost down
High
Moderate
Low
Intensity of Rivalry
High
Moderate
Low
Substitutes - Scope
Government licences and
significant capital
requirements needed
to start business
Large spend of service
consumption represents longterm revenue growth for
suppliers
High
Moderate
Low
Buyer Bargaining Power

6.

SG How Supplier See’s Kellogg
High
Very profitable
Prestige customer
Development
Core
Mobile telecom
Audioconf
Landline telecom:
intercity/
international calls
Nuisance
Exploitable
Low profitability
Not a prestige customer
Attractiveness
Internet
Landline telecom:
loca/regional calls
Supplier
Advantage
Low
6
VPN
Low % supplier’s business
Kellogg can change easily
Many other approved suppliers
High
High % supplier’s business
Kellogg cannot change supplier easily
Preferred supplier status

7.

Strategy Dashboard - Primary Area Of Focus
KSS Gemstone - Leverage & Non Critical
KSS – Follow Seven Step Plan for Strategic Sourcing
1.
Profile
the Sourcing
Group
2.
Develop a
Sourcing
Strategy
3.
Generate a
Supplier
Portfolio
4.
Select an
Implementation
Path
5.
Select and
Negotiate with
Supplier(s)
6.
Implement
and Manage
Supplier(s)
7.
Develop
Relationship

8.

Staircase Strategy
Base spend: 14 000 000 rub
Scope: Mobile/Landline tel, Audioconference,
Internet/VPN
Strategy: Leverage
Joint Process
Improvement
Group: Landline
Strategy: Use competitive bidding;
Pool volume across business units
Cost Saving: 250 000rub
Group: Audioconference
Time: May2012
Strategy: Use competitive bidding,
Strategic
Renegotiate/rollback prices
Planning
Group:
Mobile
Cost Saving: 365 000rub
Strategy:
Use
competitive
bidding
,
Include in the bidding
Time: Jul2012
Renegotiate/rollback prices
scope LL Telecom from all
Cost Saving: 700 000rub
Kellogg Russian locations,
Conduct market research
Time: Dec2012
choose the best price from
to identify right price. We
Group: Landline
quality vendors
can not change Intercall as
Strategy: Use competitive bidding;
it is our global preferred
Combine volume from different
Conduct market
supplier but we can
sourcing groups (Mobile/Landline
research to
persuade it to decrease
tel, Audioconference,
identify lowest
Group: All
prices to identified right
Internet/VPN)
price. Drive
price level for this kind of
Cost Saving: 100 000rub Strategy: Use competitive
pricees down
bidding; Redistribute
service level.
Time: May2013
the lowest
volume among suppliers
possible level
Cost Saving: 600 000rub
To define
Time: Dec2013
opportunities to
Group: All
decrease price to
Strategy: Substitute
the lowest possible
materials/parts
Identify the best
level along with
Cost Saving: 500 000rub
prices in the
getting vendors
Time: Dec2014
market for all
interested by
telecom sourcing
Indentify cost saving
combining
groups,
opportunities via
volumes from
redistribute
embracing new
different sourcing
volume among
technologies in the market
groups
suppliers
(Mobile/Landline
to
achieve
best
KSS
tel,
total value
Audioconference,
Internet/VPN)
Best Value
Evaluation
Cost Down
WE ARE
HERE!
Now
May2015
Time
savings over next 3 Years
3 years

9.

Implementation
Stakeholder Mapping
(3) Alex Kutyreff - Finance
Director
(6) Elena Alexandrova Commercial Director
(24) Andrew Burns –
REM Procurement
Manager
(21) Ilya Filipson- IT Director
(25) Sergey Borisenko – Head of
Procurement
(22) Dmitry Kirsanov –
Financial Controller
(25) Vadim Sapunov – Tax
Manager
(26) Dariya Fedoseeva –
Legal

10.

Leader
Business
3
6
Function
Core Team & Leadership must fully endorse and champion sourcing
strategy, before moving to implementation stage.
Important to identify ‘unaware’, ‘unconvinced’ and ‘neutral’
stakeholders and work, in collaboration, to move into champion zone
26
24
21
25
22
25
Self
Influence on Strategic Sourcing
Program Success
Implementation Stakeholder
Engagement Matrix
Support for the Strategic Sourcing Program
‘Unaware’
‘Unconvinced’
‘Neutral’
‘Champion’

11.

Sourcing Group
APPENDIX