Sourcing strategy - Telecom

telecom

Continuous Improvement

28% Of Managed Spend

Supplier Risk Aversion

SG Opportunity Assessment

Innovation

Right size the supply base

Policy for Mobile and Landline telecom

Supplier consolidation

Audioconf

Internet

Landline telecom: intercity/
international calls

VPN

Landline telecom: local/regional calls

supply performance; close supplier management

maximise value for money

High

Low

High

LEFT HAND SIDE

RIGHT HAND SIDE

THE STRATEGY FOUNDATION

SG How Kellogg See’s
Supplier Categorization

Landline telecom: loca/regional calls

Mobile telecom

Internet

VPN

Audioconf

Landline telecom: intercity/
international calls

Competitors

Intensity of Rivalry

SG Porter’s 5 Forces

High
Moderate
Low

High
Moderate
Low

SUPPLY MARKET COMPLEXITY ANALYSIS

High
Moderate
Low

High
Moderate
Low

Government licences and significant capital requirements needed
to start business

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)

Large spend of service consumption represents long-term revenue growth for suppliers

Vendors tend to offer 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

High
Moderate
Low

Monopoly of RosTeleCom for underground mains providing best telecom service level holds driving cost down

change easily
Many other approved suppliers

High % supplier’s business
Kellogg cannot change supplier easily
Preferred supplier status

High

Low

High

SG How Supplier See’s Kellogg

Mobile telecom

VPN

Landline telecom: intercity/
international calls

Internet

Audioconf

Landline telecom: loca/regional calls

& Non Critical

KSS – Follow Seven Step Plan for Strategic Sourcing

Leverage

Volume Concentration
Best Value Evaluation

Cost Down

Time

savings over next 3 Years

Now
3 years

Strategic
Planning
WE ARE HERE!

Group: Mobile
Strategy: Use competitive bidding , Renegotiate/rollback prices
Cost Saving: 700 000rub
Time: Dec2012

Group: All
Strategy: Use competitive bidding; Redistribute volume among suppliers
Cost Saving: 600 000rub
Time: Dec2013

Group: Audioconference
Strategy: Use competitive bidding, Renegotiate/rollback prices
Cost Saving: 365 000rub
Time: Jul2012

Group: Landline
Strategy: Use competitive bidding; Pool volume across business units
Cost Saving: 250 000rub
Time: May2012

May2015

Group: Landline
Strategy: Use competitive bidding; Combine volume from different sourcing groups (Mobile/Landline tel, Audioconference,
Internet/VPN)
Cost Saving: 100 000rub
Time: May2013

Group: All
Strategy: Substitute materials/parts
Cost Saving: 500 000rub
Time: Dec2014

Include in the bidding scope LL Telecom from all Kellogg Russian locations, choose the best price from quality vendors

Conduct market research to identify right price. We can not change Intercall as it is our global preferred supplier but we can persuade it to decrease prices to identified right price level for this kind of service level.

Conduct market research to identify lowest price. Drive pricees down the lowest possible level

To define opportunities to decrease price to the lowest possible level along with getting vendors interested by combining volumes from different sourcing groups (Mobile/Landline tel, Audioconference, Internet/VPN)

Identify the best prices in the market for all telecom sourcing groups, redistribute volume among suppliers
to achieve best total value

Indentify cost saving opportunities via embracing new technologies in the market

Sourcing Program

‘Neutral’

‘Champion’

‘Unconvinced’

‘Unaware’

Self Function Business Leader

21

25

6

3

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

24

22

25

26