In Part I we recapped Sourcing today, in Part II we did a deep dive into the key requirements of the review step as it is today, and then in Part III we did a deeper dive where we explained that while some steps were critical for a sourcing professional to undertake, others, while necessary, were a complete waste of skilled talent time as the majority of the tasks could be automated. Then in Part IV we began our deep dive into the needs assessment phase which ended yesterday in Part V where we again explained that there were two types of tasks in this steps: tasks that required sourcing expertise and tasks that didn’t. Moreover, when we dived, dived, dived, we found out that some tasks required way more sourcing involvement and consideration then is usually applied, and that these tasks can only get done if time is saved elsewhere in the sourcing process.
In this post we continue our review of the typical sourcing process and move onto strategy selection.
- Supply vs Demand Market Dynamics
- Geographic Needs and Impediments
- Known Supply Base Strength and Weaknesses
- Required Speed
We again start by describing each key sub-step, what is required and what is involved.
The first step is pretty obvious on the surface. In the Supply versus Demand Market Dynamics step, you attempt to evaluate the power of the buyer versus the power of supplier. You focus on projections of current total demand, total supply, and expected changes of the dynamics based upon past trends, and move forward with your answer. But this is usually at a macro-market level and not a micro-market level. Usually within a market, there are products where demand is dominant (like iPhone 8) and almost nonexistent (like the OnePlus). If you want the component that is in the most demand, that can be much more unbalanced to the supplier’s favour than if you want the component that is in least demand, where the supplier might actually have excess inventory and you might actually have a bit of leverage. When it comes to the market, there’s always more than meets the eye from the 30,000 foot view.
The second step is easily defined but hard to execute. When sourcing globally to serve global markets, the needs vary by market, and so do the capabilities. This means that not only must a sourcing professional understand how the needs, and values, vary globally but also how the capabilities of the supply base vary, and, most importantly, how those variations limit their capability to serve the organization in some markets. If a factory cannot produce products or services without certain materials that are restricted or banned in some countries, that can be a problem, especially if you do not know up front. If there are embargoes on the supplier’s home country by the country or countries of the intended market, that’s a problem if the supplier does not have other global operations where there are no embargoes. And so on. But how does one identify all the potential impediments and map them against the needs? Usually, lots and lots of manpower and a little bit of luck that nothing important is missed.
The third requirement is as easily defined as the second, but can be even harder to execute. If you’ve been using a supplier for years, consistently documenting performance and results, and have a team that knows the track record, you have a pretty good idea of the strengths and weaknesses of that supplier. But what about the suppliers you’ve just started using or, more typically these days, haven’t used but need to consider to either meet a diversity or innovation goal. How do you figure out the strengths and weaknesses? Where do you begin?
The final requirement should be pretty simple. When does the sourcing process need to finish by. Just take the date from the stakeholder, negotiate for a bit more time, and go. But is that really all there is or the right way to go about it? We’ll discuss more in our next post because …
We are again at the situation where the amount of work entailed in each step varies and the time requirements can be days to weeks (or even months in large global operations). And maybe it should be that way, sometimes, considering this is really the make or break step of every sourcing process. But all the time? Come back for Part VII where we dive even deeper into this key sourcing step.