Category Archives: Sourcing Innovation

Creating a Source-Ready Supply Chain …

It’s never been easy, as there have been challenges since the dawn of time with maintaining trade routes, but we’re at a point where it’s now getting harder by the day.

Disruptions are regular.
Risk is high.
Logistics costs are high and spike regularly.
Suppliers are in constant peril.
Markets are unpredictable.
And the list goes on.

How do you create a source-ready supply chain? We know that, especially in manufacturing, you have to direct source with supply chain awareness. (As per our joint series with Bob Ferrari on how direct sourcing solutions don’t work for direct.) We also know that you have to more finely classify your categories in order to come up with appropriate sourcing strategies and day-to-day Procurement Management. That’s why we created Busch-Lamoureux Exact Purchasing which, based on the pocket cube, is the first framework with a real shot at succeeding because it’s the first to admit that risk, complexity, and impact are all fully independent dimensions and that’s why the Kraljic Matrix, and every 2*2 methodology that evolved from it, doesn’t work. And we know that centralization doesn’t work, center-led is decades behind (it’s a center of excellence that shares knowledge and best practices and orchestrates Sourcing and Procurement, with Logistics and Supply Chain, but doesn’t actually execute), and Procurement as a whole has, more-or-less, learned nothing in the past two decades (see our previous posts).

We know a lot on what not to do, and we know a lot on what to do, but what’s the cohesive strategy for a source-ready supply chain? That’s the 40 Trillion dollar question.

And there is no good, or at least no simple, answer.

But there is one common thread.

Human Centric Supply Chains

There’s been one constant in trade since it began. Two, human, parties working out an agreement to exchange goods, where the goods might be currency that represents the ability to buy goods from a third party.

Supply Chains are not managed by technology, not enabled by motorized transportation, and not designed by agentic systems. This is all done by way of human intelligence who deploy the technology to help them be efficient, use modern transportation to speed it up, and agentic systems to help them execute repetitive processes. But the common thread is human intelligence — intelligent humans applying their problem solving, risk management, and wisdom to solve problems, design processes, and apply the right technology to the task. And, most importantly, ignoring (hallucinatory) Gen-AI and hands-off agentic systems. Intelligent humans use the best augmented intelligence technology to maximize their efficiency and effectiveness, 10X-ing their capabilities compared to peers, but they ignore technology that makes decisions — they keep the decisions and strategic analysis to themselves (and their mental acuity in tip-top condition) and use tech for what it is best at, data crunching and tactical processing.

This means that a source-ready supply chain is one that is staffed by intelligent, educated humans across all key functions and locations who can bring wisdom and problem solving to any issue that might arrive and conquer it. Intelligent, educated humans that never cease their quest to learn, improve, and evolve … intelligently … while applying, when it’s appropriate, all the best practice advice that SI has given you over the past two decades.

Seven Sourcing Strategies for Today’s Turbulent Times Part 2

4. Coopetition Collectives and Frenemy Facilitation

If your volumes are low or if the supplier needs more business to ensure long-term stability, then you might need to work with your competitors to form specialized captive GPOs for key common materials and components where you all need to ensure that the supply continues to flow.

But you might need to go one step further — if your peers are smaller and less financially stable then you, you may need to invest in some of your (potential) indirect competitors who require the same materials and components from the same suppliers you need your materials and components from. You may need to identify organizational needs you can buy from them to ensure their stability. For example, as an automotive company, if you only made sedans, you could invest in competitors that only made trucks and vans by buying their products for your local delivery fleets. It’s all about strengthening your strategic supply base.

5. Real-Time Product Design Substitution

It’s no longer enough to just identify substitute products when your primary source goes offline, but to have alternate product designs that can be made with different components and materials to satisfy a significant portion of your client’s needs if one of your critical suppliers becomes unavailable. In electronics, the ability to substitute different off-the-shelf chips and boards is key, especially if they are of different form factors. In control systems, different power systems, converters, and control software. Etc. If your clients just have a need to fulfill, multiple options should be available.

6. Supply Chain Enabled Sourcing

Building on supply chain aware supplier splits, carriageway carrier consolidation, and real-time product design substitution. it becomes clear that the next generation sourcing needed for today’s turbulent times is supply-chain enabled sourcing. There’s a reason that Bob Ferrari and I claimed that standard sourcing solutions don’t work for direct, and that’s because they don’t. In direct supply chains, sourcing needs to be integrated, or at least tightly orchestrated, with supply chain and logistics solutions to be successful. Otherwise, you’re not optimizing to reality, and your best laid plans will be a total work of fiction.

7. Busch-Lamoureux Exact Purchasing

We all know the Kraljic Matrix, along with every other quadrant-based sourcing methodology is broken, but no one tells you the reason why — which is risk, complexity, and impact are all fully independent dimensions that need to be measured on completely different axes and no matter how hard you try to compress them into 2-dimensions, it will never be accurate.

But in Busch-Lamoureux Exact Purchasing, we treat them as three separate dimensions and break your sourcing categories down into a pocket cube (with 8 octants). This allows us to define appropriate methodologies and technologies to accurately address each category with confidence. Something no other methodology gives you!

Seven Sourcing Strategies for Today’s Turbulent Times Part 1

1. Sales Visibility, Sliced and Diced

For years you were told that spend visibility was the key to success. For many years I echoed that claim, because it was the truth — success required understanding your spend — who was spending with whom, where, for what, and why. The ability to slice and dice not just by category and product and supplier but location, customer base, etc. was key to understanding where your opportunities were, what volumes you should be ordering, what suppliers you should be considering, where you should have contracts, and where you shouldn’t.

But that was in the age of globalization when global trade was steady, conflicts were low, maritime channels were open, and tariffs were low and stable. Today, many countries are returning to isolationism and/or off-limits due to sanctions, conflicts are many, maritime channels are constantly restricted or closed (Panama Canal has restricted throughput during droughts and the Red Sea and the Strait of Hormuz are regularly restricted or closed due to Middle East conflicts), and one country in particular keeps changing tariffs on a leader’s whims.

Not only is supply assurance the name of the game, but supply assurance in the product lines that will sell. With costs constantly on the rise (since inflation has returned as well), you need to be focussed on your top selling product lines, and how to ensure those don’t get interrupted. This will require diving into your sales data to see what is really selling, what is trending upwards, where the product is needed, and how best to allocate your orders and shipments to serve the customers. (Then, once you have figured out what you need and how to ensure supply, you can focus on spend.)

2. Supply Chain Aware Supplier Splits

You’ve been told for decades that you need to dual-source to mitigate risk in case of disaster or unexpected supply chain disruption, and while chances are you still aren’t doing it in some key categories, dual sourcing is not enough. Two suppliers in the same region, or that depend on the same supply base is not effective dual sourcing since a single event could take them both out of the picture. You need your decisions to be geologically and supply-chain aware.

And that works great if you’re only sourcing for one regional market, both are in friendly / pseudo-safe countries that aren’t too far away, and shipping lanes are relatively secure — but if you are sourcing for multiple geologically distinct and separate regions (which can be half a world away), the home countries are not friendly, and shipping lanes are a geopolitical spat away from being shut down, that’s a supply chain shutdown waiting to happen.

If you are a global multi-national selling in multiple, geologically distinct regions (North America, Latin America, UK, Europe, Middle East, Asia, Australia, etc.), you need to be building a multi-supplier global supply base where you have a primary supplier close to each location in a friendly, or at least, safe country and a backup supplier not too far away, which can be the primary supplier for another region. You might need half a dozen to a dozen suppliers for some products / categories to ensure supply assurance.

3. Carriageway Carrier Consolidation

Just like you will need multiple suppliers, you will need multiple carriers — at least one per region, and two if your shipments are large or the reliability of any single carrier (due to financial situation, fleet size, etc.) is questionable. You’ll have to group your lanes by regional transit and select the appropriate carrier for each just like you’ll have to select the right supplier for each region.

Center-Orchestrated Procurement Requires Unique Platforms

In our last few articles, we’ve been writing a lot about the need for center-orchestrated Procurement due to the current global trade environment. As a result of this, a number of policies, processes, and platforms will need to change for a modern global Procurement organization in order for it to be efficient, effective, and even endorsed.

While the core platform requirements don’t change, the unique requirements for the platform are different. When you only have to serve yourself, whatever works for you is good enough. But when you have to serve a diverse base of global users, who have to adhere to a diverse spectrum of global requirement, what works for you is sometimes completely irrelevant.

Then there’s also the fact that center-orchestrated procurement, by definition, requires:

  • orchestration — if the platform can’t orchestrate data streams, workflows, and users, it’s not sufficient
  • common data model — every platform must support the common data model in the central data store to allow for easy data integration and cross organization analytics
  • centralized supplier onboarding — there needs to be a central supplier master and management platform
  • “excellence” — if the platform can’t encode and distribute best practices across the global organization, it’s not the right platform
  • standards — efficiency comes from standardization to the extent possible, if the platform doesn’t support that, it’s no good
  • supply chain awareness — it needs to integrate with the logistics, supply chain, and PLM systems in order to allow for organizational aware sourcing and procurement
  • knowledge management — it should capture all of the knowledge needed to run the orchestrated workflows effectively
  • global risk management — all of the risks must be identified, tracked, mitigated and managed centrally

Breaking this down, you can see that before any sourcing or procurement platform, it needs to support:

  • real orchestration support — it needs a fully defined API that allows all data to be pushed in or pulled out, functions to be executed, and workflows to be configured; it can be a standard REST API or MCP, but it has to be orcehstratable
  • centralized common data model and data federation platform — that can support all sourcing and procurement data collected and generated by all systems with the ability to define the external system mappings as appropriate; this doesn’t mean the organization dumps everything into a lake / warehouse / lakehouse, but builds the foundation for federated data analysis as the best analytics platforms can pull in the data needed on demand when they have a common data model to work off of (pre-defined mappings from the global organizational systems, and a designation as to which system is “master” for any specific piece of data — which means the data model specifies, for each datum, the master system)
  • centralized supplier onboarding — the central supplier master should support global supplier onboarding; if it can’t be localized as needed (language, accessibility, etc.), then it needs to support fine-grained orchestration that will allow a local platform to mimic the global requirements and feed all of the data into the central system
  • excellence — any platform used for centralized operations need to support the creation of specialized workflows for each region, location, and project; moreover, the specialized workflows need to inherit the global requirements while supporting the regional and local overrides with minimal effort; nothing should have to be defined twice and no unnecessary work duplicated
  • standards — the platform needs to support multiple authentication, security, and privacy standards and implementations to meet global requirements; remember, different countries will require different security protocols, login protocols, privacy requirements, government platform integrations, etc. — the global platforms you select must support switching them in and out as needed by the locale
  • supply chain awareness — the platform needs to understand your supply chain data model and be capable of integrating with your supply chain platforms to integrate the required data to make supply chain aware decisions
  • knowledge management — the platforms must capture more than process, they must capture the decision making frameworks used to select and execute the processes and do the required analytics; for the categories, they must cover the strategy; for the suppliers, the soft evaluation criteria based on the objective and subjective rankings; for Procurement process selection — catalog vs. RFQ vs. tail-spend provider — the logic used; etc.
  • global risk management — a solution for identifying, tracking, and monitoring changes in global risk criteria and alerts and pushing out relevant information to the appropriate regions and locations through the tools the end users actually use (using the built-in orchestration capabilities)

In other words, the platform has to be a lot more adaptive, layered, and customizable than most platforms in use today.