How to Leverage Strategic Sourcing When Facing Issues in Your Supply Chain

 

The Earth is an undeniably massive place, but today’s global supply chains make it feel incredibly small. It’s not uncommon for organizations to source their components and materials from all over. This has created an infinitely complex web of supply chains that are equal parts awe-inspiring and terrifying. On the one hand, it’s incredible to think about how far manufacturing has come, but on the other hand, it can be difficult to wrap your mind around the potential issues and challenges that go hand-in-hand with this kind of complexity.

The term “strategic sourcing” has gained traction as a means of combating these issues and mitigating risk, but what does it actually mean? More importantly, how does it help you solve the issues your organization faces every day? Let’s take a look at the most common issues in the supply chain, and how you can leverage strategic sourcing and powerful tools to succeed.

5 Common Sourcing Issues (And How to Solve Them)

Modern supply chain management professionals are faced with all manner of questions as to how they can evolve and move forward. The rise of technology has answered many of these, but it also creates many more as time goes on. There exists a point, at the intersection of strategic sourcing and technology, where the solutions to our most common issues lie.

Here are five common sourcing issues that become opportunities when viewed through this lens:

Lack of Diversity in Your Sourcing

We’ve all heard the saying “don’t put your eggs in one basket.” With entire product timetables riding on specific components, it seems like sourcing from a single supplier would be a bad idea. Despite this, many supply chains have very little diversity in how their components are sourced. This problem is unavoidable in some cases. Specific technologies or parts are sometimes only available from a single source.

In situations like these, it’s important to partner closely with your provider and maintain open communication lines. Nothing should ever catch your or your organization off-guard. Here are some tips for diversifying your supply chain:

  • Work with a mixture of large enterprises and SMEs (small and medium-sized enterprises). This will provide your organization with a healthy mixture of speed, innovation, and localized suppliers
  • Source from a variety of geological regions as natural disasters can easily cause delays or disruptions in one place, but not another
  • Focus on trusted suppliers with ethical and sustainable practices.

By expanding and diversifying your sourcing strategy, not only will you mitigate risk through various options, but you will also help encourage competition in the industry. As more suppliers emerge and new innovations arise, you will stand to benefit from competitive pricing and a higher quality of service.

Limited or Short-Term Risk Management

As you supply chain expands to new areas and adds new suppliers, the inherent risks rise as well. Your organization should take a proactive and strategic approach to potential disruptions. A Deloitte study found that 85 percent of surveyed global supply chains experienced at least one disruption in the last 12 months. Furthermore, companies with proactive risk strategies spent, on average, 50 percent less to manage the issue.

Your approach to mitigating risk in the supply chain should encompass every step of the process. It all starts with properly vetting third-party suppliers and other relationships to ensure their capabilities and added value are a match for your organization’s needs.

Consider these elements of a sound risk management strategy:

  • Consider all the elements of a location, from the potential weather to the local laws, to potential tariffs on imported goods
  • Provide your teams with access to relevant data so they can make informed decisions and build accurate risk profiles
  • Discuss your risk plan with every department and your suppliers.  Encourage collaboration when disruptions occur

Awareness and analysis of relevant data are key for monitoring and mitigating risk in your supply chain. With disruptions being an inevitability, it’s better to be proactive than reactive. As part of your strategic sourcing, you should also constantly review and improve your risk management strategies with the entirety of your organization.

Low Visibility Across The Supply Chain

The digitalization of supply chains is the way of the future, but it comes with its own challenges. Big data, the Internet of Things (IoT), increasing customer demands, and the ever-present threat of disruptions or counterfeit components are all contributors.

The members of your organization are demanding more visibility in the supply chain. The goal here is to provide bird’s-eye view of the manufacturing process. Your procurement team needs data to make informed decisions about what to source. Your engineering team must have the ability to communicate with procurement when design or component changes occur.

There’s a gap between these two departments. Achieving this kind of visibility involves taking several crucial steps:

  • Discover the pain points where increased visibility could help. For many, this could be inventory management, but each business is different
  • Invest in new technology and innovations that empower your teams with both data and the tools they need to take action
  • Establish your key performance indicators (KPIs) and use these to measure goals.

In the true spirit of strategic sourcing, you should always be looking inward as you increase visibility. Constant analysis and improvement will ensure you’re always ahead of the curve.

Increased Customer Demand

While it may seem odd to discuss customer service in the scope of strategic sourcing, the two are indeed connected. The modern consumer has access to much of the same technology as your organization. The need for increased visibility extends beyond the borders of your organization.

Customers are demanding more insight into the supply chain. While part of this refers to tracking shipments or the status of products, it also incorporates your choice of suppliers and distributors. Ethical and sustainable sourcing is not only responsible, it’s crucial.

In their Global Corporate Sustainability Report, Nielson revealed that 66 percent of consumers are willing to spend more on a product if it comes from a sustainable brand. Millennials in particular are looking for brands that are open and honest about their sourcing strategies.

In short, your brand should represent something and attach itself to a cause. When you’re choosing suppliers and sourcing components, look for partners that you want to be associated with. Transparency and visibility for your customers will strengthen your brand and encourage loyalty in the long-term.

Inefficient and Outdated Strategies

There’s a culture of fear surrounding major change in the supply chain industry. Why is that? In our pursuit of mitigating risk, we’re allowing ourselves to be held back by the very things we thought could save us. While the transition away from familiar strategies requires a leap of faith, the industry is at a turning point.

Technology and innovation offer the tools your organization needs to gain a competitive edge. You simply need to reach out and take them. Things like excel spreadsheets, email threads, and long paper trails are no longer sustainable means of managing a supply chain.

Take a step back and look at the challenges your organization faces across sourcing and procurement. Take a long look at your strategic sourcing and you may find it lacking. Digital transformation is no longer an option, it’s a necessity.

Now that you’ve had a chance to reflect on your strategic sourcing, how are you tackling the issues above? Are you breaking down silos and encouraging collaboration? Do your teams have access to analytics and data to make informed decisions?

Most importantly, are your sourcing methods flexible and proactive? If you didn’t immediately answer yes to any of these questions, then it’s time to make some changes. These are the characteristics that should define your organization:

  • Reliable and real-time data
  • Informed risk analysis and mitigation
  • Flexibility in your sourcing
  • Proactive vs reactive strategies
  • Cross-department collaboration

Findchips Pro is the ultimate tool that offers all of these things in a single platform. Transform your BOMs with big data, market analytics, and the flexibility you need to be proactive instead of reactive.

Our latest feature, Split Award, is the next step towards that goal. Automatically split orders between two or more preferred suppliers when inventory is low. If you haven’t seen what Findchips can do for your organization, schedule a demo to see it in action.

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Alex Peron
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