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Renegade Consulting, Inc.

Services - Strategic Sourcing

The Parthenon Athens, Greece
Coastline Santorini, Greece
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Strategic Sourcing

Sourcing is the process of achieving savings by obtaining lower prices from a company's current part supplier or re-sourcing particular parts to new suppliers who have lower production costs. Lower prices are obtained by identifying viable suppliers and then creating a competitive atmosphere by having those suppliers bid for business. Downward pressure is place on the final quote by having three rounds of bidding including feedback reports provided to the suppliers informing them of their standing in the market compared to the lowest verified quote.

Request for Information (RFI)

At the beginning of the sourcing initiative, the team must send out RFIs, normally in the form of a Microsoft Excel spreadsheet, to all potential suppliers that may be able to provide parts for the commodity being sourced. When the RFIs are returned, Renegade has developed a process to upload the data from the spreadsheets and into a master database. From this database, all the supplier information is organize into one page summary sheets. Once in summary form, the sourcing team may quickly identify viable suppliers that they would like to invite to the next stage of the process.

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Request for Proposal (RFP)

In the next phase of the initiative, all viable suppliers are sent RFPs detailing the client's parts on which the suppliers are going to bid. The RFP asks the suppliers to break down the final price of the parts into several different accounting buckets of production, assembly, and delivery costs. After the RFPs are returned, all supplier bid information is uploaded to a central database and analyzed by the team.

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Market Price

One of the most critical components of the sourcing process is setting the market price. While common sense may dictate that the lowest price should always be the market price, this is not always the case. The team must perform many validation checks to ensure low bids do not contain any pricing errors and that market price suppliers can support the additional volume of business if the client awards them the new parts. Once the market prices are identified and validated, the Renegade application has a simple interface that allows the team to select market prices with the click of a button.

Supplier Feedback

After the market prices have been established, feedback reports must be issued to the bidding suppliers informing them of their standing in the market. This creates a competitive atmosphere that results in downward pressure on the final price. Suppliers know that setting a first round market price does not ensure them the business. They must remain competitive through all three rounds to be awarded production of the part. The feedback report will also allow suppliers to concentrate on parts that they are competitive on and possibly abstain from bidding on parts where they can not offer any savings.

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Savings

After the third round of bids, business in normally awarded to the supplier providing the third round market price. Total savings for the initiative is calculated by taking the price of the parts at the beginning of the process, subtracting the new sourcing bids, and multiplying the difference by each part's annual volume.

Solution Example

To view an example of our Strategic Sourcing Web Application, please visit our Application Portal at: Strategic Sourcing Web Application

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