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It is essential to realize that direct materials sourcing is a key component to a broader PLM strategy. Yet few manufacturing organizations we speak with look at managing direct spend as part of a continuous process. Rather, they follow a "pick it up and toss it over the wall" mentality that focuses on effecting outcomes in a vacuum. As a result, in far too many cases, the yoking of sourcing and PLM comes down to a dangling thread rather than a Velcro connection -- or ideally, both fibers being cut from the same cloth.
For those that make the true interlocking connection, the results can be stunning. In the best of cases, make vs. buy decisions based on design visibility (and procurement visibility into design) can form the basis of an overall company strategy (like Apple) rather than just a sourcing or cost management strategy.
For Apple, the decision to develop strategic contract manufacturing partners and multi-tier suppliers to tightly collaborate product design, prototype and production sourcing has not only helped the company out-innovative the market and bring products to consumers more quickly (while having industry beating inventory turns). It has also driven financial, off-balance sheet wizardry by making suppliers play in a role in capital investment.
In merging the PLM/design and procurement process, it's also important to realize that pooling direct spend is different than for indirect -- and often does not work, at least not if traditional methods are employed. Manufacturers and procurement organizations must look at the aggregation of spend at different tiers of the supply chain on the material level beyond a certain point, rather than driving supplier consolidation at the upper tiers.
This presents a huge challenge for those who do not have visibility into design specifications and materials requirements at their fingertips (rather than having to hunt through design drawings and manual extracting parametric details). However, those who do it right can drive significant advantages from strategic materials and commodity management perspectives. Indeed, the best aggregation opportunities (for control, risk reduction and savings) often require looking and managing multiple tiers of the supply chain. And to enable this requires a close linkage between design, sourcing and supplier management applications.
There's gold in them there part attribute information details. You just need to know how to mine it -- and influence it in the first place.
This post is based on excerpted content from the Spend Matters Perspective: A Direct Materials Guidebook – Six Key Principles for the Manufacturing Road Ahead. The paper is part of the Spend Matters Research Library, a service that offers free access to over fifty Spend Matters papers to qualified procurement and supply chain practitioners. Providers, including software companies, consultants, BPOs, staffing firms/MSPs, etc., can access the Spend Matters research library by becoming Spend Matters PRO Core (single seat) or Premier (company-wide) access members.