I’ve long been an information junkie when it comes to reading up on different tips for global sourcing. Even though I don’t “do” it anymore like I used to – with the stomach scars from eating insects and drinking alcoholic Drano in China (and worse) to show for it – I attempt to stay on top of observations and recommendations from others still engaged with it. As one example, Adam Brosch, a practitioner from Berlin Packaging, recently shared his thoughts on 6 global sourcing risks and how to mitigate them. His tips are basic but succinct – and would certainly be of use for those getting their feet on the ground globally for the first time.
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Yesterday, I introduced the concept that global sourcing is dead. What we have moved to instead is setting and enforcing procurement standards that matter as much locally as globally. But one thing that won’t go away when it comes to any global issue is distance. As Adam Brosch, a practitioner from Berlin Packaging LLC, hints at in a recent article on mitigating sourcing risks, there are 2 areas to consider when it comes to global: production scheduling and logistics. These 2 topics are magnified and become inordinately more complex the longer a supply chain stretches. In fact, when it comes to managing global procurement operations, one could argue the intersection of procurement and supply chain, centered on these 2 areas, becomes that much more important.
Spend Matters welcomes a guest post from Art van Bodegraven. When I use the term Anticipatory Sourcing without setting the stage fully and correctly with an audience, even an audience of one, the reaction is eerily reminiscent of the late and much lamented Richard Pryor exclaiming, "Say what?!?!?" (Shades of the cult classic film, “Stir Crazy.”) But, at the risk of offending and alienating, I will stake out the position that, unless you are doing anticipatory sourcing, you are taking up valuable space that ought to be occupied by someone more motivated, more aware, more understanding and, possibly, even a bit more intelligent.
In the first installment of this post, I considered the applicability of lower-end sourcing tools and when they’re most likely to be a good fit for organizations and under what scenarios. Today, as I continue this analysis, I’ll take the other side of the argument focused on when these tools can even do more harm than good, starting first with one of the biggest issues with e-sourcing technologies in the first place – the most valuable features all-too-often sit on the shelf, rarely if ever to be used by procurement organizations.
Get the Spend Matters viewpoint on sourcing and its transformation into supply chain with a new, downloadable paper from Jason Busch (managing director). "When Sourcing Becomes Supply Chain" enforces the notion that data-driven analysis in procurement is essential and already underway. This movement can benefit organizations and businesses from various industries, and the paper digs deeper into the continuing outcomes that can be expected when sourcing and supply chain become one and the same.
The slowly fading recession has left a profound impact on pricing in sourcing contracts. That impact is seen in a trilogy of forces with long-term ramifications that will keep pricing at recession-era levels for the foreseeable future, even as contract volume rebounds with pent-up demand. This “new normal” imparts lasting implications on future sourcing agreements. There's a trilogy of forces keeping downward pressure on prices. Read on for what these are and for the implications of this new normal on pricing for future sourcing arrangements.
When I first read about strategic sourcing in Forrester, IDC, and Gartner reports back in 1999, I thought the analysts had no clue what procurement was. But then I realized that they were specifically referring to another IT-centric definition of strategic sourcing, rather than one focused on broader procurement, finance, and supply chain. I came across a more recent article in Data Center Dynamics.
In the first of this two-part series, I briefly traced the evolution of IT strategic sourcing requirements, courtesy of a Data Center Dynamics column discussing an IT perspective on the evolution of procurement priorities and requirements. Today, we come to some of the specific requirements that IT sourcing programs have, including the need to focus on the full lifecycle of a supplier engagement to monitor and track savings. These include monitoring metering, charge-backs, and other areas.
So far in this series, I have written about both the strengths and some of the limitations of basic sourcing tools – and when organizations should consider using them as opposed working with those that really do specialize in supporting more advanced sourcing organizations and sourcing requirements. Another key area that I’ve observed again and again in my research (including both public and private sector) in the case of more advanced tools is when organizations must have sourcing applications reflect heavy levels of governance and process based on regulatory or other requirements.
We've recently been covering the travails of the latest scathing report to hit federal strategic sourcing circles: NASA’s inability to implement a strategic sourcing program including agency-wide spend visibility. The following is an excerpt from NASA’s Inspector General’s Report into one particular failure to use a strategic sourcing program to drive savings. It’s too good to not print in its entirety.
Spend Matters welcomes this guest article by Heather Towt of The Hackett Group. The increased focus on strategic sourcing in response to ever-shrinking margins is not a phenomenon specific to the developed world. Throughout the developing world, companies in Latin America, Asia, the Middle East and Africa are shifting from transactional-based purchasing and tactical sourcing to a strategic sourcing model. While the goals of strategic sourcing (cost savings, improved performance, risk mitigation and improved supplier relationship management) remain the same across geographies, unique challenges arise when sourcing in developing countries. Besides the usual suspects of language barriers, differing cultural norms and complex financial issues, several additional challenges should be kept in mind when sourcing in a developing country.
For those with total cost on their minds, re-shoring remains a hot topic – especially from the standpoint of factoring both price and risk into the supply chain equation. But in certain industries and categories, in-country or local sourcing is in fact the right strategy from the start. I came across an article in AMD that points out just how critically industry certifications and regulation can factor into the sourcing equation for markets such as A&D with specific requirements.
Sometimes “choice” in procurement is precisely what not to give to practitioners. This is especially the case as we consider the latest scandal to envelop NASA, who failed to implement a strategic sourcing and spend analysis program (see here and here) that provided even a modicum of leverage and visibility into spend within the agency. One “excuse” the agency provided was the numerous options for procurement that were available.
Spend Matters welcomes this guest post from Art van Bodegraven. What is that Johari Window thingy, anyway? The technique and the tool was developed in 1955 by American psychologists Harrington Ingham and Joseph Luft to help assess relationships with oneself and others, highlighting known and unknown areas and blind spots. Joe and Harry's visual tool quickly became the Johari Window. How does this apply to procurement and sourcing? We have, in any enterprise of any size, needs to deal with a staggering array vendors and suppliers of a vast range of size, sophistication, simplicity, complexity, services, products and materials. The Johari Window is an extraordinarily useful tool for sorting all this out.
In a recent Sourcing Journal Online article, Sourcing is Hard, Mike Todaro, managing director of the Americas Apparel Producers' Network, quotes Barbara Zeins, an industry expert that published a short list of “9 Big FAT Garment Lies,” which we might as well call “Global Sourcing Lies,” more generally. Her list of supply chain lies is nearly universal to all industries.
Did you miss our webinar last week on supplier collaboration in strategic sourcing? Fear not because it is still available. Check out the recording of “Supplier Collaboration in Strategic Sourcing: an Oxymoron?” while it is still here to listen to! Thomas Kase (VP of Research) and Pierre Mitchell (Chief Research Officer) have also written a paper that provides helpful background if this topic is one of particular interest to you.
Sourcing Journal Online recently published a column by Mike Todaro, managing director of the American Apparel Producer’s Network, simply titled Sourcing is Hard. The piece is ingenious and captures, in roughly 1,000 words, why the intersection of sourcing and supply chain are difficult for so many industries beyond just retail (while using apparel examples to illustrate its points). If you read one thing this month, check out this op-ed.
Drawing from the Spend Matters perspective When Sourcing Becomes Supply Chain, Jason considers the various constraints and requirements of an extended supply chain. There are trillions of potential permutations of optimal supply chain designs to ensure the highest possible fill rates, how to manage unit and total costs, improve sustainability metrics, and so on, but only one optimal outcome.
If you’ve followed this series so far, you’ll already know that the types of technology that change the way we go about pursuing a particular supply chain and business outcome – not just a specific event or negotiation – can have a huge impact on the ability to engage stakeholders. It also explains why advanced sourcing approaches that are most successful on a first-time basis almost inevitably require third-party expertise to pull off (unless a procurement organization is already “up-skilled” enough with truly expert resources in both the market design and stakeholder/supplier engagement areas). One way to think about it is that the market designer is essentially playing the role of a sourcing god. The stakeholder/supplier engagement lead is the priest, minister, rabbi or shaman who preaches much to the flock and gets them on-board.
Although logistics activity can generate large volumes of data useful for analysis and decision making, data and analytics capabilities within many logistics organizations are lacking. Logistics teams may have the raw data, but they lack the ability to cleanse, store, analyze, report on, and visualize the data to drive insight and business value. As one example of the data gap, sourcing has historically centered on lane-by-lane decisions, with category managers awarding spend based on best price. Then, six months following an award decision, organizations discover that actual costs vary dramatically from expected costs based on bids and awards.