Sourcing: Understanding the Art of the Supply Chain Possible

Yesterday, we welcomed Trade Extensions to Spend Matters as an Associate Sponsor. Trade Extensions is getting into a level of complexity that enables sourcing and procurement to cross over into supply chain, with only a handful of other providers (e.g., CombineNet (ASO)/SciQuest and BravoSolution) doing the same. Consider the following case example of a direct mail project.

The sourcing event (calling it that is an understatement) was for a financial services company that had a direct mail project focused on sending 1.8 billion letters to customers. Here’s how Trade Extensions describes the charter and situation:

“The project was to ultimately deliver letters to the bank’s customers but to get to this stage each part of the supply chain was tendered. This meant designers bidding for design contracts; paper suppliers bidding to supply the paper, envelopes and card; printers bidding to print the letters and marketing material; assembly houses bidding to collate the material and alongside this were carriers bidding to provide transport services for every stage and ultimately deliver the packed envelopes to the postal service for delivery to the bank’s customers.”

By the numbers, the sourcing event was massive:

  • The value of goods and services was $1 billion
  • The event had 65,000 items (including 60,000 transport destinations)
  • 100 suppliers participated
  • The event collected over 400,000 bids

What made the project unique – and what procurement can learn from – is the value of making such a large effort as a single project, including allowing suppliers to make conditional offers based on a variety of possibilities (e.g., order quantity, amount of spend, consolidated line items). Bringing together supply chain network design, transportation, inventory, and different sourcing options for upstream materials can yield not just results, but also a level of internal procurement collaboration with the business that would have been impossible until recently.

According to the Trade Extensions team, the findings were fascinating. The effort “demonstrated as it became apparent that some of the printers already had extremely good rates with paper suppliers but, understandably, these rates would only be available if the printers were awarded the printing contracts. With combinatorial bidding it meant the printers were able to offer multiple prices – one for supplying the paper and printing and one for just printing the materials.”

If you work with Trade Extensions or one of their few competitors, we promise it will open your eyes to what sourcing can become and the way it can change the business. Stay tuned as we share a range of even more complex case studies from Trade Extensions and others in the coming weeks to expand the art of the procurement possible.

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