Supply Chain Secrets #18: Sourcing Internationally Part 1
Every manufacturing business is faced with sourcing critical production components from international suppliers. This is rarely an easy process, however, the difficulty can be compounded if management underestimates the investment required to be successful. Ultimately, it will involve an Amex card, plane tickets, Fed-X bills, bad Skype connections and some dead ends. Here are some steps that should ease the pain.
International Sourcing Step 1: Type Up a Plan
The first step is to write down your plan, include other groups in this effort. This will help create the buy-in and support. Start the document by stating the goals of the project. Identify the key success factors, sourcing criteria, technical specifications, task list, timeline, and roles and responsibilities. Develop a budget; this may come as a shock to your manager. Stick to your guns, management is likely to deny that the project requires any kind of expenditure. This is wrong. Make your case and the value of the expected outcome. They will eventually see the error of their ways or they will fire you. Better to go down swinging I say. Other things to consider for your plan include a qualification process, risk and risk mitigation strategies, a total cost worksheet model to compare quotes, and a PowerPoint presentation for management and other interested groups. Remember to update your plan during the course of your project.
International Sourcing Step 2: Use Industry Standard Specifications
Finding the right supplier requires technical documentation. Take the time to develop component specifications in an industry standard format. Review the specifications suppliers publish for their products. Make sure you mimic their format. This means busting out the metric system unless you are sourcing in England. This can be a tricky step. Simply converting a drawing into metric doesn’t always work. International suppliers are going to use metric stock. This can impact tolerances, the manufacturing process and product cost if this step is not done correctly.
International Sourcing Step 3: Get Engineering Involved
Engineering support is critical to successful international sourcing. International sourcing is a messy process, often times engineering will flee at the first sign of trouble. Make sure you line up the organizational support required to prevent this from happening. Often times it is necessary to make changes to your component design and possibly your product to accommodate a component that can be sourced abroad. Tolerance studies and tradeoffs require engineering time and input.
International Sourcing Step 4: Develop a Supplier Profile
There are hundreds of thousand of suppliers in the world and all you need for your project is one good one, maybe two. Develop a list of supplier requirements. Prioritize the list; even weight the attributes to develop a supplier-scoring matrix. Your supplier attributes matrix will allow you to quickly whittle down potential suppliers to a more manageable list. This step will also help to reduce some of the subjectivity of the selection process.
International Sourcing Step 5: Start the Investigation
This is step where people like to ask others about the suppliers they know. While this can be helpful, it is more likely to lengthen the process and lead to more misses than hits. Conduct your initial research online. Start contacting suppliers directly and begin a dialogue.
International Sourcing Step 6: Develop an Introduction Letter
Your supplier introduction letter should do three things; explain why the inquiry is important to the supplier, introduce yourself, and explain what you want them to do. The first objective is obvious, describe your company in a compelling fashion and detail the business opportunity being presented. The second objective is to humanize the inquiry. International business tends to be more personal than domestic business. Give them a reason to engage you as a person. You will be amazed at the difference this approach will make in the responsiveness of a supplier. Lastly, explain what you would like them to do next. Be specific. Give a single estimated production volume, target pricing, sample due dates, estimated production ramp-up date, etc. The more specific you are, the more real the opportunity feels to the supplier.
International Sourcing Part 2: You Have their Attention, Now What??......
About the Author
Tom Petersen is the Managing Partner of ThreeCore, an operational consulting firm in Beverly, Massachusetts. Tom consults for multinational companies engaged in the design and manufacture of high-tech products. His team is dedicated to helping companies create competitive advantages using innovative strategies and process-driven improvement. For more information go to www.threecore.com or follow Tom on twitter @3CoreConsulting.