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A typical sourcing and procurement effort involves understanding the requirements/specifications of the goods/services to be sourced, inviting bids from suppliers, evaluating them, selecting a set of suppliers and taking inputs (on the lead time and suitability of the supplied items) from the internal customer about the performance of the supplier. Strategic sourcing is when this becomes a cyclic process wherein the feedback (supplier scorecard) on the services/goods provided by the internal customer is analysed (by a spend assessment exercise and supplier benchmarking) and used in future sourcing efforts. This cyclic nature of the process is the most important part and helps to further improve the whole procurement process.
A strategic sourcing process provides the opportunity to realize sustained long term cost savings. Effective implementation can help achieve cost savings of as much as 15% of the addressable sourcing spend.
With increasing global competition, companies need to improve their bottom line to maintain/increase their margins. This makes it imperative for a firm to look for low cost destinations like China and India. The cost effect can either be in terms of availability of low-cost labour, raw materials or finished goods (for retailers) or a combination of any of the three. Global sourcing, in-spite of its many benefits, brings in a lot of complexities to the supply chain most important of them being international logistic management. Some of the issues that need to be addressed are:
- Sound technology support
- Hidden costs identification to make it successful in the long run
- Setting up international sourcing offices/warehouse etc.
- Reduction of supply chain visibility
- Lack of transparency
- Takes time to set up the supply process at a location far from the home operations
- Long term view of the country from which sourcing is done (to ensure the savings are a continued process and not one-time)
- Clear understanding of the requirements
- Distance factor increases the uncertainty in the whole procurement process
- Quality assurance
Even for firms with an established global sourcing network there is a significant untapped savings potential that can be realized by strategically addressing each of the above issues.
eProcurement or eSourcing refers to the technological platform provided to the whole sourcing process. It can be used to specify the functional specifications required for the items to be sourced, to have e-auctions and to evaluate suppliers. eProcurement helps in:
- Streamlining the whole process
- Provides visibility
- Reduce cost and complexity
- Increase accuracy
- Faster solution
- Reduced paperwork
Aqua MCG helps you identify your:
- Global sourcing needs
- The category of goods/services to target
- The sourcing location(s) that best fits your requirements,
- Analysis of support infrastructure required, and
- Pilot implementation apart from addressing the critical issues outlined above
- A detailed assessment of the eProcurement requirements for the firm
- Identification of the right eProcurement solution to be used
- Facilitate in the implementation of an eProcurement platform
- Change management for smooth adoption
Strategic sourcing is a continuous process and as a company moves up the maturity ladder the opportunity widens. A strategic sourcing process if performed effectively has the potential to provide the single biggest cost reduction opportunity for a company.
Aqua MCG provides a complete end-to-end solution to all your direct/indirect materials sourcing and procurement needs. It helps you identify and tap the quick hit as well as long term benefits from performance improvement in sourcing and procurement.
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