Seven steps to smart fleet sourcing
The classic procurement process still provides a benchmark for corporate fleet purchasing executives. For many procurement professionals, A. T. Kearney’s Seven Steps for Strategic Sourcing represents the blueprint for purchasing procedures.
For buyers, it lays out a logical, transparent and objective framework for assessing internal requirements, evaluating potential suppliers, negotiating contracts, and reviewing supplier performance. For suppliers, an understanding of the Seven Steps process can give a priceless insight into the procedures and likely actions of potential customers.
With fleet being a challenging mix of commodities (tyres, fuel) and critical services (leasing, fleet management), it’s fascinating to see how the Seven Steps can be applied.
1. Internal assessment
The first step is to profile the products and services required, to understand the business needs for them, and to establish how much the company currently spends in these area. The accounts payable department should be able to provide information on what a business is buying, how much it’s buying, which companies it’s buying from and how much it’s paying. These receipts require close scrutiny –purchasing departments frequently discover that internal divisions are buying the same products and services from the same supplier but on different terms.
This is also the time to explore whether the volume of products and services being purchased could be reduced or consolidated, so it’s vital to involve the users of these products and services, and to gauge their satisfaction levels with current suppliers.
2. Develop the sourcing strategy
Having measured the products and services the business is buying, it’s important
to separate them into either strategic or non-critical categories. Non-critical tend to be commodities – for example, a litre of diesel is the same, regardless of filling station – and are ripe for consolidation.
Fleet management and driver support, however, are services which can differ sharply from one supplier to the next. For this type of strategic purchase, it may be worthwhile to investigate service improvements with the existing supplier to enhance the quality of the offering.
3. Create the supplier portfolio
Step three involves identifying potential new global and local suppliers. Which companies offer which products and services, and are they capable of meeting new trends? Keep an open mind when drawing up the criteria for supplier selection.
4. Decide how to draw up a shortlist
Traditional selection procedures involve a Request for Proposal (RfP), setting out requirements and asking potential suppliers to itemise their proposed offers, including prices. A formal, well constructed RfP will allow a buyer to compare competing offers directly against each other.
5. Negotiate and select suppliers
The information in the RfP is just the starting point for more detailed negotiations to establish the best possible deal. During negotiations, it’s important to have a clear vision of the optimum outcome, and to be aware of alternatives if a supplier refuses to budge. Equally, it’s critical that all internal parties sign off on the decision and are aware of the grounds for supplier selection.
6. Appoint the supplier
At last, it’s time to draw up contracts with the nominated supplier(s) and work on a plan of implementation. This involves a communication plan and solutions for potential transition issues that are likely to arise.
7. Monitor the agreement
The contract may be signed and sealed, but measuring key performance indicators from suppliers, as well as enforcing compliance from internal partners is essential for long term success. Regular feedback between supplier and customer will help both parties achieve their goals from the arrangement.