Sourcing definition by Wiki:
Low-cost country sourcing (LCCS) is a procurement strategy in which a company sources materials from countries with lower labor and production costs in order to cut operating expenses. LCCS falls under a broad category of procurement efforts called global sourcing.
Before you decide for sourcing!!!
This is a common notion in industry that sourcing people are messenger boys and in-fact some of my colleagues have proved this regularly and habit do not improve.
They just collect half baked information from various sources and jump immediately, and as a matter of fact 60-70 % of Global Sourcing projects do not click. They start well but lose direction after some time, and eventually stop. This leads to frustration of employee, leadership and most important part of supply chain – The Supplier.
Sourcing is not merely floating the RFQ, getting the quotes, making a quality plan, negotiate, and release the
Here I would like to highlight a few points which are must before you start a project on sourcing:
1. Understanding the business case
2. Technical Specification.
3. Searching for the right source.
4. Searching for the right country – avoid
1. Understand the business case: Just jumping into sourcing before understanding the business case is the biggest mistake people do. Though the organization leadership, the plants, the favorable economy will give all support of the project, as a sourcing person you have to get convinced yourself for the project. You have to discuss with the plants, the leadership, the potential vendors, and asses the life of the project. If you feel anything not convincing do not indulge in the project. The motive of any project should be clear. Here I trust my intuition, just try to think from the perspective of every stake holder why he wants to do the project. What their motives are? I know it is difficult but imagining yourself in his office and donning his uniform surly helps.
So first understand the whole business case deeply, discuss in a forum for this, try to feel the pulse of all stake holders and then convince yourself that this project will float and make a descent savings for the company.
2. Technical Specification: The common thing what my community of sourcing people do is never cross check the technical specifications and forwards the prints and RFQs to potential suppliers. I will suggest them to make a list of things to check immediately and when something is missing, do not forward to the supplier. This list is for automotives, engineering goods..
o Raw Material specifications – Ensure that the correct RM is written on the print. If not send a immediate query to your engineering. And now this is important and may have a drastic effect on savings of your project. SUGGEST A ALTERNATIVE MATERIAL. Consult with you supplier if any alternative is there. If you found one, raise a request to engineering to change. But for this first do your homework. Be prepared with the data and questions people across the company may ask. If you get through and new material is changed, show this in your savings calculations.
o Weights – Especially if you are dealing with castings, forgings, injection molding etc, immediately check of the weights. The designers are a different breed and may not put this data. This required for the quick quotes from the suppliers.
o CTQ (Critical to Quality) parameters – In my experience all drawings must have the CTQ parameters. When in mass production, the quality person must inspect only this. If you do not find CTQ as the designer to mention them by the CTQ symbol.
o Surface Finish – Check on the print what kind of surface finish is asked for and is your supplier capable of attaining that. Here comes a savings opportunity. Question the designed why that kind of surface finish is required. Call a meeting and ask in a forum to justify the surface finish. If approved you can again show the savings.
o Tolerances – Before sending the RFQ like other sourcing guys, ensure the tolerances mentioned in the prints are attainable by the supplier. Check on what kind of machines he is going to meet those tolerances. Also if you have your engineering basics right, do question the designed how he has reached the tolerances. Most of the time designers act funny while calculating tolerances so may be there lays another opportunity for savings.
These are the quick checks I do on the drawings I receive. Till I am not convinced about these drawings and specification, I never send the prints to the suppliers. It’s better to delay rather than giving suppliers a chance to laugh and question.
Practice this for few days, may be your manager will go berserk but your vendors will start liking you for the support you give to them. Also they will treat you different from your messenger boy colleagues.
to be continued....
