Keys to Success
Communicating the Plan Internally and Externally
Organizational Buy In
Bringing in an outside organization to assist a procurement team can inadvertently trigger a host of employee concerns that can reduce the effectiveness of a strategic sourcing initiative. Common employee concerns involve job security, how the outcome of the program will reflect on their past performance, and the impact this work may have on well-established relationships with incumbent suppliers. Senior management needs to address this reality by staying involved with the program through implementation to overcome these issues and assist in moving the program forward at key decision points.
Supplier Communication
Incumbent suppliers frequently feel threatened by strategic sourcing programs. It is important to discuss your process with them and reassure them that your decisions will take into consideration their past performance and capabilities. Problems arise when the customer allows an incumbent supplier to circumvent the process by accepting bids outside of the established process.
Managing Expectations
A sourcing program can create unrealistic expectations in terms of cost reduction and the speed of implementation. A typical program at a mid-sized organization can take anywhere from 6 to 9 months to generate bottom line results that improve profits. Also, organizations can underestimate start-up issues causing them to move too quickly in the implementation phase. This can lead to unnecessary stock-outs and additional expediting costs. The most important element in managing expectation is a well developed, written sourcing strategy and a detailed implementation program.
Anticipating Implementation Problems
Many times the outcome of a sourcing program leads to the inclusion of new suppliers. It can take new suppliers 3 to 6 months to fully understand how to best work with your organization. Documentation issues and quality procedures are the most common root cause of start up problems. The keys to reducing these issues are regularly scheduled supplier meetings and the assignment of internal resources to manage the implementation process.
Cohesive Operational and Sourcing Strategies.
Too often companies look to reduce a specific set of parts without tying the effort back into an overall operational strategy. A good example is a company that wants to establish a pull system for a specific commodity group while managing the material flow through an MRP system. This type of inconsistency diminishes the effectiveness of a strategic sourcing effort and leads to disappointing results. By discussing the current operation strategy and its limitations a sourcing team can devise a plan that can be implemented with the current manufacturing process.
Incentive Alignment
Senior management needs to make sure that a sourcing program does not potentially conflict with established internal incentive programs. Inconsistency in bonus programs can derail a program. This tends to be an issue when a company is looking to outsource materials that are currently produced in-house. This potential problem needs to be reviewed during the planning stage of the program and adjustments need to be made to make sure all groups share in from a successful outcome.
Bringing in an outside organization to assist a procurement team can inadvertently trigger a host of employee concerns that can reduce the effectiveness of a strategic sourcing initiative. Common employee concerns involve job security, how the outcome of the program will reflect on their past performance, and the impact this work may have on well-established relationships with incumbent suppliers. Senior management needs to address this reality by staying involved with the program through implementation to overcome these issues and assist in moving the program forward at key decision points.
Supplier Communication
Incumbent suppliers frequently feel threatened by strategic sourcing programs. It is important to discuss your process with them and reassure them that your decisions will take into consideration their past performance and capabilities. Problems arise when the customer allows an incumbent supplier to circumvent the process by accepting bids outside of the established process.
Managing Expectations
A sourcing program can create unrealistic expectations in terms of cost reduction and the speed of implementation. A typical program at a mid-sized organization can take anywhere from 6 to 9 months to generate bottom line results that improve profits. Also, organizations can underestimate start-up issues causing them to move too quickly in the implementation phase. This can lead to unnecessary stock-outs and additional expediting costs. The most important element in managing expectation is a well developed, written sourcing strategy and a detailed implementation program.
Anticipating Implementation Problems
Many times the outcome of a sourcing program leads to the inclusion of new suppliers. It can take new suppliers 3 to 6 months to fully understand how to best work with your organization. Documentation issues and quality procedures are the most common root cause of start up problems. The keys to reducing these issues are regularly scheduled supplier meetings and the assignment of internal resources to manage the implementation process.
Cohesive Operational and Sourcing Strategies.
Too often companies look to reduce a specific set of parts without tying the effort back into an overall operational strategy. A good example is a company that wants to establish a pull system for a specific commodity group while managing the material flow through an MRP system. This type of inconsistency diminishes the effectiveness of a strategic sourcing effort and leads to disappointing results. By discussing the current operation strategy and its limitations a sourcing team can devise a plan that can be implemented with the current manufacturing process.
Incentive Alignment
Senior management needs to make sure that a sourcing program does not potentially conflict with established internal incentive programs. Inconsistency in bonus programs can derail a program. This tends to be an issue when a company is looking to outsource materials that are currently produced in-house. This potential problem needs to be reviewed during the planning stage of the program and adjustments need to be made to make sure all groups share in from a successful outcome.
ThreeCore works with our team to source a wide variety of materials. In their first project, they helped us create documentation for a transformer and coils bid package. In the end we eliminated inventory, reduced the supply base, and lowered our costs by 10%.
Robert Cause
Director of Materials
Danaher Controls