Standard Sourcing Solutions Don’t Work For Direct

the doctor recently teamed up with the Supply Chain Master Bob Ferrari over on Supply Chain Matters to bring you an initial seven part series on why Standard Sourcing Technology Solutions Don’t Work for Direct, which you can find at these links:

If you read Parts I and Part II in detail, which you most definitely should because we’re only going to summarize a few highlights here, we detail some of the big reasons they don’t work, besides the fact that most were designed for indirect and can’t even do the basics of direct sourcing. The reasons we put forward included:

  • Direct Material Sourcing is Hard
    • substitution (like satisfaction) is not guaranteed
    • substitution is always conditional when available
    • demand is not easily aggregated
    • delivery time guarantees are often significantly more important
  • Sourcing Platforms Don’t Do Direct Well (as most were designed for indirect)
  • Most Sourcing Platforms Don’t Support Bill of Materials
  • Most Sourcing Platforms Don’t Support Optimization

Then we dove into why direct solutions don’t work either:

  • It’s Not Just Landed Cost, It’s Total Cost of Acquisition
  • It’s Not Just Cost, It’s Supply Assurance
  • It’s Not Just Supply Network Assurance, It’s Timing

That’s just the baseline sourcing side of the equation. We still haven’t talked about the supply assurance side:

  • They Aren’t Designed for Multi-Stage NPD/NPI Sourcing and Quality Assessments
  • They Aren’t Designed to Capture Network Performance and Carrier Risk
  • They Aren’t Designed to Capture and Assess External Risks

That last point is key. If you’re not considering the geopolitics of where you are sourcing from and where you are sourcing to, and how those might change in the near future, you could be in for quite a shock, as many of you in the USA found out this year. If you had been paying attention to the election, noted how much a certain Tech Bro donated to a certain campaign, and compared that number to past campaign contributions, you would have known the election, which appeared neck and neck, was being bought and paid for, which party was going to win, and who was going to be President.

If you did your research, analyze everything he said publicly in the decades leading up to his first campaign for political office, look at what he actually did in his first term, and read Project 2025, you would have known something was coming on the trade front, especially where certain countries were concerned. And you would have known that what was coming was not going to be good for your business if you were sourcing from China.

But it’s not just the “to” destination you have to worry about, especially if the only thing increasing is cost. It’s also the “from” destination, which could be cut off entirely by a new regime that imposes sanctions or embargoes, or could undergo a rapid economic decline due to bad government decisions, external third party sanctions and embargoes, or global shifts in trade. A great discussion of this can be found in Koray Köse’s recent LinkedIn post on on Poland’s Economy: Reslient Amid Political Storms and how it faces a test under it’s new President — and how, should it fail that test, supply chain leaders need to be prepared. It’s the perfect example of why supply chain considerations need to be pulled back to sourcing, because there’s no way an average sourcing professional today would consider any of this when evaluating suppliers for a direct sourcing project.