Two constant nightmares and banes of existence for almost all supply chain managers and executives are the lack of visibility with their supplier and sourcing network and a less-than-cohesive global sourcing strategy.
Sourcing plans and suppliers’ mix both have an elevated impact on revenue and margins for a company. As much as entire industries have transformed through technology and technology adoption, the inbound supplier chain has still largely remained unchanged over the last few decades. Connection points and communication are still analog, the problem exacerbated by the myriad and fragmented profiles of suppliers.
From data points collected through talking to hundreds of fast-growing enterprises, here are some pointers towards a successful global sourcing network:
- A successful strategy for global sourcing starts with a digital strategy
There is no plan for a competitive global sourcing network without investments in a digital platform where all applications and technology investments are integrated. In essence, all parts of the value chain need to be digitized. If critical parts of the supply chain, including suppliers, supplier profiles, and supplier transactions, continue digitally disengaged and analog, a cohesive sourcing strategy is impossible.
2. Provide and mandate digital platform participation and training so each supplier can work off their digital identities
Investing in technologies to integrate sourcing and supplier activity is a start. There is still the cultural pushback to combat. Companies must partner with their technology partners to provide consistent education and constructed-with-empathy training programs to help suppliers get on such digital platforms. The best platforms allow different user profiles to self-direct their journeys through the application. Next-generation platforms are product-led with DIY tutorials and intuitive user experience: traits that will help supplier onboarding and engagement.
3. Diversification is at the heart of a successful strategy – diversify across geography, and product types
While an obvious point, even the biggest of companies aggregate hundreds of millions of dollars of spend for the most important product types into the same set of suppliers in the same country or groups of countries. It is almost too scary to envision: making this change into new countries and new suppliers given the lack of trust, fear of non-compliance, and potential high execution risk with new suppliers. So, companies stick with the tried and tested, and in the process, performance becomes complacent, and metrics do not improve. A digital platform lays the foundation for alleviating these fears. With all data recorded, existing suppliers and transactions can be tracked and recorded. And new suppliers and their transactions can be tracked and recorded. There is less fear and higher assurance to drive towards more aggressive metrics with full visibility and transparency and real-time data at your fingertips.
Diversification across geographies does not need to be a binary game of either make at home or in Asia. While making the product in your end customer(s)’ country is ideal and has speed advantages, nearshoring can have benefits just as tremendous and higher. Reticence and fear have caused blindness to progress: countries in South America, Central America, and Europe have efficient, burgeoning manufacturing industries ripe to be tested. With suppliers’ ability to be digitally connected, a foray into new countries is more than doable.
4. Always be on the lookout for new suppliers to replace the ones at the bell curve’s weak end; default assignments are not good. Use data for smart bid management
Looking for new suppliers is a headless-chicken-running-around exercise. Combining in-house sourcing expertise with marketplaces and supplier platforms can alleviate the pressure to find new suppliers. Once existing suppliers have profiles with real-time ratings, the next step is to identify the suppliers at the bell curve’s weak end. It is often shocking to sourcing and supply chain managers when they look at the data once supplier ratings are in and discover that they have assigned millions of dollars of purchase orders to low performing factories and suppliers. Poor performance may mean more than low quality. High costs, longer time to market, infrequent updates to compliance reports, slow response time, etc., could all individually and/or together indicate poor performance.
5. A data and technology leader must be guiding your 5-year sourcing strategy and plan; host all data on the cloud, and the data warehouse on the cloud
Sourcing skill sets are essential in a sourcing executive, but a data and technology experienced visionary is far more critical to fill the role. An effective global sourcing strategy needs data sets to be linked, accessible, and communicating with one another. Data sets still sit in different systems, some of them on-premise. By hosting all data on the cloud and a data warehouse on the cloud, the computational ability is limitless, and computation speed is incomparably faster than the status quo. A connected supply and sourcing network means growing sets of vast volumes of data. Massive data sets are useless without the computational power to manage and query the data in real-time. But with hosting and data warehouse on the cloud, powerful insights and analytics supercharge any global sourcing strategy.