In the manufacturing industry, the concept of sourcing means searching for a supplier that would help you meeting the company’s objectives in terms of cost, quality and deadlines. Given the rapid evolution in production needs, finding the right vendor at the right moment is a key strategic issue. Yet this is often easier said than done. What means do companies have at their disposal to improve their supply chain management?
Strategic sourcing process
Searching for suppliers is a key step in the procurement process. The suppliers need to meet the company’s expectations regarding cost, quality and deadline as well as performance. In addition to this traditional outlook, companies now face co-development and innovation challenges. Strategic sourcing encompasses all these realities and becomes a sustainable competitive advantage.
This is usually a four-step process.
Creating a panel
To set up their panel, buyers must actively monitor the market. Thanks to the data collected, the teams can identify the industrial suppliers and distributors best suited to the different needs of the various functions within the company. Purchasing managers extend a “Request for information” (RFI) to their potential partners in order to pre-qualify them based on their potential suitability for the company.
However, finding reliable information can be difficult. To ensure their information comes from a trusted source, buyers can check out specialized websites, speak with experts or turn to their colleagues. The Mobility Work platform brings together more than 10,000 maintenance experts from various backgrounds within one community-based CMMS. Users can share tips and opinions with the rest of their network.
Once the panel has been composed, it needs to be rationalized. In other words, it’s time to select the members based on vendor profile, type of product required, delivery conditions, terms and conditions of payment… To gain a better understanding of this long and complex process, we recommend mapping the company’s procurement function. The Kraljic matrix is a graphic representation of the different procurement families according to their degree of risk and the complexity of the desired market.
Request for Quotation (RFQ)
During an RFQ, buyers ask their entire panel for quotes and then they study and compare them. Since quotes may have legal value, this process may require special procedures. In fact, some companies have very strict policies regarding calls to tender. For example, for some strategic procurement categories (exceeded threshold, public contracts, etc.), buyers will have to seek competitive tenders from several vendors by requesting quotes.
Identifying a partner
At the end of a long selection process, the procurement function and the chosen supplier revisit the offer. This is the last negotiation phase before signing the supply contract. At this point, depending on the room for negotiation, the buyer goes back over the displayed price, legal conditions, delivery conditions and return policy… This discussion is extremely important as it is the basis of your budding partnership.
SRM and partnerships
A multi-sourcing approach is not recommended for complex and technical production purchases. On that front, more and more companies tend to prefer establishing partnerships with their suppliers. Transparency, trust and competition are the hallmarks of these new forms of partnerships.
In addition, both parties exchange and share information which could impact the QCD (Quality, Cost, Delivery). Depending on the strategic impact of the procurement, the client may have a strong interest in maintaining privileged relationships with his equipment or consumable suppliers. Suppliers frequently ask for feedback from their clients as part of a drive for continuous improvement.
New online tools now make these interactions easier. Designed as a community-based platform for exchange, Mobility Work Hub brings together key industrial players and maintenance professionals. Thanks to a shared interface, suppliers can access statistics about the use of their products pulled from our CMMS application.
How to address sourcing
Stemming from your global strategy, your sourcing strategy reflects the company’s objectives and priorities. Other factors are then added to the Quality-Cost-Delivery trio:
- Portfolio and procurement cycle. Clearly define your objectives and internal needs and ensure that they are in line with the company’s objectives. For each product type, determine the number and profile of suppliers required.
- Importance of the product. Your approach may vary in accordance with the importance and elaborateness of the equipment or consumable sourced. For instance, the amount of allocated resources -human and financial- will differ and other control processes will have to be followed.
- Competitive environment. Make a list of all the companies you have ever used then do a “cost-benefit” analysis while comparing them with potential partners. Get a clear picture of the market by taking into account competitive dynamics, legal constraints, current procurement practices, etc.
Targeted geographic areas. There are several reasons to turn to global sourcing. Broadening the geographic origin of your supply sources ensures the supply of factories located abroad and helps procure products which don’t exist on the national market. Other buyers turn towards foreign markets seeking better pricing conditions. Although certain foreign vendors’ prices can be enticing, that shouldn’t be your only criteria. Political, social, economic and environmental factors can have a significant impact on local activities.
- Need for innovation. Co-development is an interesting prospect, especially for start-ups and SMBs. Industrial suppliers and clients split the costs and benefits of the innovation as part of a common goal for continuous improvement.
By considering all these factors, you will be able to develop a sourcing strategy adapted to your organization.
How to choose the right supplier
Your strategy is the cornerstone of all your sourcing activities. Even so, choosing the right supplier is usually done on a case by case basis. To ensure that you make the right decision, here are some tips to get to know your business contact.
- Match between supply and demand. Carefully examine the details of the products offered and make sure that they match your internal needs. When sharing their official catalogue on Mobility Work Hub, our suppliers can add technical documents for their users. Maintenance teams can view them directly within their next-gen CMMS.
- Delivery conditions, delay management and return policy. Beyond the obvious financial interest, this lets you know how flexible your potential supplier is. How do they handle small or large quantities? Can they do urgent deliveries? If you’re considering a long-term relationship you need to know whether your partner can adapt to changes in your needs.
- Business expertise. There is often a higher quality risk when searching for new suppliers. There are two ways to reassure clients and lower the risk. Obtaining certifications (for example, ISO certifications) creates a first level of trust. Using community-based applications like Mobility Work, allows you to get advice and share best practices with other professionals.
- Customer care. With the growing importance of SRM, buyers are looking for new ways to communicate with their providers. Customer service and technical support therefore play an increasingly important role in the decision-making process. New industry 4.0 solutions such as Mobility Work Hub simplify communication between supply chain actors.
Of course, this isn’t a comprehensive list, other more or less rational elements will come into play to influence your decision. For instance, some companies will tolerate higher costs if it allows them to collaborate with a well-known or particularly innovative brand. Others will favor security, familiarity or relationships. Still others will favor proximity.
Whatever the preference, Mobility Work provides its users with a platform dedicated to improving the relationships between industrial actors. With Mobility Work Hub, both suppliers and providers benefit from a next-gen marketing tool. By sharing their official catalogues with Mobility Work CMMS users they obtain statistics on the use of their products. For their part, maintenance professionals gain access to new supplier profiles and technical documents.
Schedule a presentation with our team or try Mobility Work Hub now for free for 30 days!