Scenario Planning in Strategic Purchasing

Last time, we had a look at the concept of playbooks as a way of describing short term, more tactical responses to particular sourcing challenges.

As a part of that, the concept of scenario planning was introduced as a way of building different approaches and outcomes to add into playbooks. However, Scenario Planning as a discipline is far more use to us than just for playbooks. Indeed, it should form an absolutely core approach for the development of alternative strategies in Category Management and Supplier Relationship Management.

The orthodox version of Scenario planning starts with deciding which are the critical factors which will decide the nature of the future environment. In our case, we’re thinking about the supply chain environment and the value that can bring, and we are inputting the data gathered and reviews and analyses done in category management or SRM ( strategic Relationships, rather than Supplier Management, approaches). As a start, we need to make sure we understand the assumptions we are using, and to record those. After that, we can get into defining the critical factors more clearly.

The second stage is to create a framework showing linkages between the different factors:  some will be inherently linked to others ( in our supply chain world, it is possible to have mutually exclusive scenarios, such as ‘insource’ or ‘outsource’), and others which will link to  all possible scenarios (such as ‘increase process efficiency’). This is expected to produce 7-9 mini scenarios. Much of this will be done using post-it’s on a wall, moving and clustering ideas and inputs together, re-writing and adding definition to the various ideas used to describe the critical factors.

Once we have these groupings together, we can then start to add in some depth, to create an outline description of the scenarios we have grouped together, so we are more able to relate to the story each one tells.

From here, we need to reduce the number of scenarios we have in front of us, perhaps through combining different elements to make a larger scenario, or by excluding those which seem undeliverable or that don’t meet the requirements of the business. We do need to be careful, as some may have great potential, but require a larger change in approach than we are generally prepared to bring to the business; we should retain those possibilities and test to see if a larger change ( such as a JV or significant development work in a particular direction) would be acceptable.

Once we have a reduced number of scenarios, we have to write them up into detailed stories about the potential changes, how the implementation will work and the costs and benefits available from them. This should include clarity about the starting position and assumptions made, and which events of changes will affect the direction and outcome.

As a business, we then have to decide if we will follow the route determined by the scenario which best meets the future requirements of the business. By building and testing scenarios in this way, we can find a better way forward.

We can also use the general scenarios built to describe to the organisation why we have chosen a particular approach. The discussions will be enhanced by having a clear view of alternatives described in the other scenarios we have developed, whowing the depth and quality of thought we need to have in place.

So, in short, scenario planning is a core element of all category and supplier strategy development. We need to be good at this part of the overall process and be able to deliver the outcomes well from this process. Get to understand it  and deliver great strategies!

http://en.wikipedia.org/wiki/Scenario_planning

Mark Hubbard is Co-CEO and founder of Positive Purchasing Ltd. He really likes the scenario planing approach and hopes you do too.

www.positivepurchasing.com

mark.hubbard@positivepurchasing.com

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About Mark Hubbard

I set up a specialist purchasing consultancy and a business focussing on seeking innovation. I work all over the world with clients, helping purchasing teams develop new ways of delivering value for their businesses. I love thinking about how purchasing works, and how it can be better, and I'd love to share some of those thoughts with you
This entry was posted in Category Management, Insight, Supplier Relationship Management and tagged , , , . Bookmark the permalink.

2 Responses to Scenario Planning in Strategic Purchasing

  1. Michael Lauterbach says:

    Hi Mark,
    I hope you are doing well?

    I like the postings of your company also the Videos on you Tube

    Especially this guy in the funny shirt 🙂 explaining the category management tools.

    Best regards

    Michael

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