When it Comes to Global Sourcing, Supply Chain Issues Matter Most

In a frequent "stump" speech that I give where I talk about Spend Management issues past, present and future, I usually incorporate a few minutes to discuss how the procurement and operations functions need to work more closely together (and how in at least some organizations, they're doing just that already). A lot of this sounds more simple than it really is. For example, consider the need to balance operational cost elements (inventory requirements, lead-time, logistics, tax, tariffs, duties, etc.) with unit cost in global sourcing decisions. This should be a no brainer, right?

Well, I could embarrass some of the biggest and most respected names in industry and management consulting who've gotten it wrong for their organizations and their clients by failing to implement global sourcing programs that deliver what they've promised. This is why at least some big names in automotive are re-evaluating some of their China sourcing decisions, looking again at Central and South America (Mexico in particular).

In a Supply Management article titled, The Weakest Link, Peter O’Brien, DHL's Senior Vice President for Supply Chain Management at DHL, discusses how "he has worked with buyers who lack understanding of how Asia operates and are naive about the risks and costs involved." He argues, among other things, that "Procurement professionals need to think beyond procurement. Not just about the cost or quality of a product but also where it is warehoused and how it is delivered, as well as inventory financing ... Only by considering the full supply chain will they continue to reduce total cost, guarantee quality and supply and reduce management complexity."

The rest piece is a bit self-promoting, as it discusses how DHL has set up a wholly owned subsidiary, Triscol, to work with clients on such issues as global sourcing, logistics and inventory financing. Think of it as a 3PL flirting with management consulting and trade advisory work for specific spend categories. Still, I agree with much of what O'Brien has to say, and if I were a betting man, I'd say the odds are in favor of Triscol being able to build out a sustainable and valuable practice because most management consultants doing similar work still haven't a clue how to deal with the non-sourcing factors involved in international trade and the implementation and ongoing management of global sourcing programs.

Jason Busch

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