ISM's 89th Annual International Supply Management Conference
Roberta J. Duffy
Thomas A. Crimi, MBA, C.P.M., MAPA
Supply Chain Team Coordinator
Ralph G. Kauffman, Ph.D., C.P.M.
University of Houston-Downtown
Whether it's advocating a process change, obtaining a new capital purchase or evaluating new supply sources, creating a winning business case is a key component to any supply manager's skill sets. At ISM's 89th Annual International Supply Management Conference, the Sunday afternoon presentation on this topic drew a large crowd. Crimi and Kauffman detailed some strategies for business plan, providing key components of the plan and overall change management considerations. They focused on an example of a business case that recommended a particular supplier for a given category or spend.
Table of Contents. The following elements should all be included in any business case.
- Executive summary and supplier recommendations. Although these evaluations take place relatively late in the process, this executive summary presents the facts up front.
- Specific business cases to the organization's business units. Because a particular supplier selection will have different effects on different business units (both in process and savings, etc.), data should be itemized per unit. One important point here is for the supply manager to distinguish between the total spend that could be applied in this situation and the amount of spend that you currently anticipate will be applied. This is gross spend versus addressable spend (see slides). The difference between these two numbers is the additional spend that you'd still like to go after and segmenting it might just help sway a decision-maker to put more of the gross amount into the address amount.
- Additional total cost of ownership (TCO) opportunities. This is a chance to highlight the factors that must be added to the dollar spend amounts. They include material substitutions for specifications changes (as specified and if customer agrees to the substitutions), transaction cost savings for e-commerce, inventory savings through vendor stocking, and value-added savings for process improvements.
- Service levels/non-price evaluation. When presenting this case, different members of the audience will focus in on certain components. For example, business units are likely to be immediately drawn to this section, as they're curious how their service levels will be affected. A CEO might gravitate immediately to the summary or bottomline figures. The point is that all sections are important for total buy-in.
- Implementation. Be realistic about timing and resources required. Resist the urge to be overly optimistic.
- Request for concurrence to proceed. This portion may include a request for complete and total approval, or may just be an interim approval to proceed to the next evaluation process.
Inherent in this process are change management considerations. That's because if a situation is warranting a business case and you're trying to obtain buy in, chances are you're talking about some type of major change. In today's business environment, perhaps because of current outsourcing trends, many are fearful of any type of change. So, beyond the solid business arguments that may point to your recommended solution, effectively understanding and managing apprehension and fear on the part of those affected may be the most challenging portion.
By Roberta J. Duffy, editor of Inside Supply Management®
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