The following post is based on the Spend Matters Perspective, When Sourcing Becomes Supply Chain. Readers may also find of interest our Spend Matters Plus/PRO premium content covering indirect, direct and services sourcing (and e-sourcing), as well as our free research covering the e-sourcing market.
Please click here for Part 1 in this series.
Previously, this organization answered all of the questions in silos with 80 full-time employees dedicated to this task – albeit individually and not collectively. They even used their own procurement team, who sourced inputs on an individual basis – pulp, logistics, origination, photography, print, graphic designers, etc. Essentially, the catalog was not one category in terms of how it was managed: it was over a dozen!
By compressing all of these individual silo decisions (previously made at different points in time, independently) into a single sourcing and supply chain event, the organization was able to radically shift the cost economics of how it went to market for this tender— creating tens of millions of dollars in annual savings and far greater alignment among stakeholders, as well as improving various “soft” outcomes including CSR metrics in the process.
The fundamental element of this “sourcing meets supply chain” project involved data collection based on the following types of elements from internal stakeholders and various suppliers at different tiers of the supply chain:
- Where is a given required item (e.g., paper) in the supply chain, and what are associated variables (e.g., specification) and materials/service level requirements?
- When is it available? In what quantities?
- What volume discounts or pricing apply and under what scenarios (order size, shipment type – container load, etc.)?
- What is the quality?
- What is the environmental impact of a decision?
Being able to gather millions of data points during a sourcing process and then interpreting ideal outcomes by applying internal constraints and requirements can often lead to surprising outcomes that were not envisioned in the first place. For example, it might make sense that a catalog for a specific Asian market is actually produced within the Eurozone and then shipped, but that production in North America is highly regionalized (down to local pulp suppliers, printers, and freight carriers). This use case example – which runs as a continuous process for the retailer in question to this day – is proof that it’s possible to compress supply chain network design, demand management, raw materials procurement, corporate social responsibility (CSR) programs, and strategic sourcing into a single, integrated effort that yields better outcomes for all, while also saving significant costs.