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MATERIAL SOURCING AND BUYING STRATEGIES

Critical Aspects to Future Success of Supply Management Organizations

Introduction:
Being a ‘boundary function’, the role of the sourcing function is to link the company's business needs with the capabilities of external suppliers. For this linkage to provide real value supply must be able to interface with two very different worlds—the external world of the marketplace and suppliers and the internal world of business units, projects, and functions- and the perspectives and approaches of these two worlds can be very different. Solving the Rubik’s Cube provides a strong analogy to implementing an effective sourcing strategy- It is not good enough to get “two colours right” while disrupting the “rest of the cube.”

MATERIAL SOURCING AND BUYING STRATEGIES

 STRATEGIES FOR EFFECTIVE SOURCING

The strategies for effective sourcing simultaneously balance design elements of structure, information, people, goals and measures and external alignments. Research on extant literature and gleanings from on-ground experience across sourcing professionals in the country reveal the following aspects critical to future success of supply management organizations:

  ONE SOURCING STRATEGY DOES NOT FIT ALL- NEED FOR DEVELOPING CATEGORY

A typical purchaser of raw materials, operating goods and services for a large manufacturing entity buys more than 300 unique categories from more than 10,000 unique suppliers. Intuitively, it would be easy for a sourcing professional to envision the need for a wide variety of sourcing strategies for categories that possess characteristics that vary as widely as life insurance, corrugated packaging, MRO supplies and janitorial. Key characteristics of different category types need to be analysed and understood on a category-by-category basis, which can be done by asking and answering the following key questions:
  • Are expenditures in the category large enough to create buyer power, relative to suppliers and other buyers (or large enough to make a sourcing impact)?
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