Strategic Sourcing for many organizations is the proverbial riddle, wrapped in a mystery, inside an enigma. Ask ten companies what it is, what it is not, and its importance or lack thereof to an organization and receive ten different answers. Typically the answers you receive revolve around tactical implementation and miss the point of what should be behind the Strategic Sourcing curtain. This article will pull back the conventional wisdom curtains to reveal the truth. Hint, you ain’t gonna see Commodity Management, Spend Analysis, E-Auctions, VMI, EDI, JIT (Just-In-Trouble), ERP, MRP, KPI’s or Logistics on the list.
Let’s drill down the to the true definition, essence, soul, heart, core, meaning, and significance of Strategic Sourcing. Strategic Sourcing is:
New Product Development
- The first step on the path from R&D into production.
- Starting point for product realization.
- Supply chain cartographer and choreographer for the product lifecycle.
- The diviner of specific core competencies a supplier must have.
- The selector of a supply base in alignment with corporate strategy.
- The-White-Knight saving engineering teams from intractable technical problems by leveraging supplier core competencies.
- The leader of cross-functional teams to qualify and establish preferred suppliers.
- The developer of new strategic suppliers to ensure a successful product launch.
- The go-to function when supplier relationships are spiraling down the rabbit hole.
- The Negotiator-in-Chief with manufacturing partners.
- The final authority for deciding to drop an existing or add a new supplier.
- The bridge, buffer, diplomat, interpreter, and nursemaid between the internal and external engineering and management teams.
- The builder of DFM supplier/customer teams to significantly reduce costs and improve quality.
- The commercial terms expert advising your legal department on supplier contracts.
- The Long Term Supply Agreement Tsar.
- The integrator of the business needs of the organization, its’ market, customers, and suppliers.
- The educator of the organization on sourcing best practices to optimize value from the supply chain.
- The transformer of new product development cultures from silos to cross-functional.
- The gadfly bugging the engineering teams to get suppliers involved early in the design process.
- The trusted advisor to the top executives on all matters affecting the supply chain.
A misaligned supply base is always less flexible, unresponsive, unsupportive and not vested in the relationship. Ill-conceived supply bases will constantly off-gas hurdles to success. Following are 10 Supply Chain plagues caused by inept Strategic Sourcing:
- Late shipments.
- Quality problems.
- Manufacturability issues.
- Delayed product launches.
- Above budget COGS.
- Unexpected cost increases.
- Inadequate capacity.
- Poor production planning.
- Lack of technical support.
- Unauthorized parts and materials substitutions.
All the EDI, MRP, ERP, JIT, KanBan, onerous contracts, threats, and other tactical methodologies will not create a sustainable supply chain. Sustainability (aka Continuity of Supply) boils down to selecting suppliers with a management culture and business strategy in alignment and an ongoing process of building deep mutual trust. The majority of companies do not recognize the need to cultivate and invest in the qualitative aspects of supply chain relationships. Strong supply chain relationships are one of your company’s most valuable assets, treat them accordingly.