Aylık arşivler: Şubat 2017

Global or Local Sourcing

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Strategic sourcing has become an extremely important element to the growth of any company. In order to stay competitive, companies need to constantly ensure the right level of coordination between innovation, organisational efficiency, price policy and procurement.

There appears to be a growing trend towards global sourcing; companies are constantly seeking to find the next low cost procurement option in order to gain an advantage over its competitors.

However there is a second narrative; local sourcing. Recently, more and more arguments are springing up about the immense benefits associated with sourcing locally. This narrative therefore begs the question; is local sourcing not the better option?

We will take a critical look at both sourcing techniques and see which option will better serve our organization’s procurement needs

Arguments against global sourcing

  1. Transport costs

With transport costs growing and with constantly changing demand patterns, organisations need to find smarter ways to become more responsive to customer needs and in a cost effective manner.

In recent times, oil prices have seen significant rises in price; reaching an all time high of approximately US$147 per in July 2008. While the prices have recently crashed to approximately US$60, the longer term price curve is likely to continue in the upward direction and it is worthy of note that for every one dollar rise in oil, there is a corresponding increase in the costs of transportation.  Therefore, unless there are new discoveries of ways to go around this, prices of things will continue to rise.

  1. Supply chain risk

There are also several risks that are inherent in extended supply chains that are detrimental to the growth of any business. Risks such as;

  • Extended lead times
  • Exchange rate risks which affects products pricing
  • Variable lead times in the supply chain, leading to a high level of uncertainty and inconsistency.
  • Loss of control
  • Reputational risk
  1. Loss of agility

Extended supply lines usually have adverse impacts on both time-to-market for new products and the responsiveness of suppliers to customer demand changes. Organisations are unable to quickly respond to significant changes in the market due to the extended lead times. Likewise these extended lead times tend to make organizations unjustifiably exploit larger economies of scale thereby leading to overstocking of supplies which also affects their response time to market innovations.

  1. Sustainability

Global sourcing’s increased need for transport has also impacted negatively on the world’s carbon footprint. Globalization only ends up exporting domestic carbon footprint to countries elsewhere and at an increased rate

In addition

There is an increased risk in the loss of intellectual property rights as there is often less legislative protection or enforcement in developing countries

The argument for Global Sourcing

The rising trend towards global sourcing is probably an inevitable on due mostly to man’s natural instinct to trade, seek options, explore alternatives and find new ways of doing things. Coupled with recent advances in communications and technology, it appears as if global sourcing practices have only just begun to shape the procurement world.

Some of the arguments for the huge importance of global sourcing practices include;

  1. We need Global sourcing to sustain our way of life

The constant rise in world population and the diminishing rate of resources to cater for this growing population has largely impacted the need for globalization in trade (procurement) and all other aspects of human endeavor. Nations who are in deficit will continue to look to other nations where items to be procured are in surplus and are readily available.

  1. The most sustainable option may not be the obvious one

Local sourcing may appear more sustainable but there are a number of documented cases where global sourcing has been found to have less impact on the environment. Conditions such as favorable weather conditions, vegetation, technology, availability of labor and work ethics might actually have significant positive impacts on manufacturing and production thereby leading to less carbon footprints than when sparsely produced

 

  1. Innovation can provide the solution to issues arising from global trading

It is highly possible to use innovative technology to combat the environmental challenges of global trade. Significant advancements in technology in most industrialized markets have aided the creation of breakthrough energy solutions which offers a new model for bringing lasting energy solutions that are reliable, affordable and doesn’t emit greenhouse gas. This trend has facilitated the growth of global industry.

Today there are thousands of individuals and companies across the globe working hard to harvest different kinds of clean energy in order to change the way we produce goods & services and in many cases, these experiments have been very successful.

  1. Global Sourcing Promotes Peace

There is also an interesting argument that global trade promotes peace among nations. Nations that trade together are unlikely to go to war with each other.

Conclusion

In arriving at a decision on what sourcing strategy to adopt, the points listed above need to be taken into consideration when comparing between global or local sourcing strategies. Whether local or global, neither of the two are inherently right or wrong, it is only a matter of carrying out careful analysis of both sourcing techniques with respect to your company’s procurement needs and selecting that which is more suitable to meet those needs. Wrong sourcing decisions can cost you valuable time and money

E-procurement Tips

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E-procurement Tips

E-procurement constantly requires extensive strategizing and figuring out new ways to do more with less amidst intense pressure to always deliver positive results. In light of this, competition is unbelievably fierce; teams are constantly changing, and there’s increasing pressure to constantly have the upper hand.

For your organization to be successful with her e-procurement strategies, it’s helpful to adopt practices that will ensure you are always ahead.

Below are 10 winning tips to consider in order to fundamentally affect in a positive way, the success of your organisation’s e-Procurement strategy:

  1. Team work

A successful e-procurement department must never work alone. Your organisation’s e-procurement department should consist of strong teams consisting employees with defined roles and responsibilities and who will work collaboratively as a unified group towards achieving the organisation’s common objective. Each member of the team should play their individual roles to ensure the success of the team. When and if this happens, success is sure to be achieved in the company’s e-procurement strategy.

  1. Analyze Data

You have to back your strategy with meaningful numbers and data. Procurement professionals must constantly analyze data when strategizing in order to guide the decision of what strategy to adopt. Likewise, the team can also use these numbers to track trends, recognise threats, spot opportunities, alter strategies and optimize opportunities for better performance.

  1. Know Your Competition

Research and Monitor your competition so that you always know who and what you’re up against and what they are always up to.   There are many ways to go about this; follow your competitors on social media, subscribe to their marketing newsletters, and regularly check their websites for company updates. You can also encourage your procurement teams to engage in conferences, webinars and seminars to help them stay ahead of the curve,

  1. 4. Manage Relationships

Good vendor relationship is an important ingredient for sustained success in any organisation’s procurement strategy. As you get to know your vendors, engage with them more and help them participate and deliver better through your procurement chain. Define what your expectations are and give the vendor a chance to explain how it will meet those expectations. Take the time to ask for several references and make sure you understand the amount of training and support that is needed throughout the entire process.

The more complex the product or service, the more important it is to identify the competence and capacity of the vendor. Smaller companies with less complex procurement needs should however not spend too much vetting every single vendor. Gathering useful information about your vendors will help you define your vendor preferences and in the long term, help you streamline your vendor list and simplify your procurement process.

  1. Maximize time and resources

Procurers and vendors alike are extremely busy people with each trying to meet the needs of many at the same time. In order to maximize everyone’s time and resources, preparation is key. Prepare in house before meetings, perform needs assessment analysis and constantly re-evaluate your relationship with your vendors.

Meet with your vendors periodically to review pricing and working conditions to make sure that they are still meeting up with required expectations.

Have someone designated to manage all your vendor issue and keep all vendor contracts, contact information, and related documentation in a single location so that whenever an issue arises, related information is easily accessed and they are resolved quickly.

  1. Save! Save! Save!

In E-procurement, all cost savings are important. Companies are quick to target big dollar spends for e-sourcing and ignore the lower cost items. Summarily, all these costs add up into something significant in the long term and if you must get the best value in your e-sourcing activities, every category of spend must be incorporated into your e-sourcing strategy.

  1. Embrace the change

A new way of doing things can sometimes be intimidating for management and staff of a company, especially when it has the potential to uncover additional savings. E-sourcing process creates a competitive dynamic that is way above the league of traditional sourcing methods and top executive in the organisation need celebrate and promote this new way of doing things. Keeping an open mind and applying e-sourcing techniques and tools in new and creative ways will ensure your program maintains momentum and remains profitable.

  1. Vendor selection should not be based solely on price.

This is very regular practise for most e-procurers and it’s easy to understand why. However, this approach to e-sourcing is surely a recipe for disaster. There are other factors that should be considered when selecting your vendors. Factors like; experience, capacity and track record of vendors providing such services. Identifying a great price should just be one step of the entire process.

   9.  Follow up on quality control.

Make sure your vendors are supplying to specifications. It’s not enough to select the least cost provider with a good reputation on paper and then go to sleep thinking that all is well. Continuous follow up on quality control with your suppliers is key to ensuring that you get what you paid for

   10. Be consistent with your results

Procurement professionals also face a constant need to be consistent. You need to find the right tools and solutions that will work for your organization. By clearly defining the organisation’s procurement objectives, delegating specific roles and responsibilities to members of the procurement teams and making the teams see how the procurement process aligns with those objectives, you’ll be able to deliver consistent results.

 

 

Misconceptions About E-sourcing

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E-Auctions are very essential tools in a procurer’s toolbox and is capable of providing extraordinary value if appropriately applied. However, wrong implementation and sourcing strategies and a lack of the necessary expertise needed for a successful execution, oftentimes undermines the potentials and benefits that can accrue from e-sourcing practices.  This sometimes results in having disappointed and disgruntled sourcing teams that become open to myths and misconceptions about the true worth of e sourcing technology.

So with all these tales of woes hovering everywhere in the air and contaminating the minds of optimistic e-sourcing professionals, how then are we to determine what information is true and that which is a myth as far as modern sourcing techniques are concerned.

Listed below are 5 of the most popular of these false facts that are being peddled about e-sourcing

  1. E-sourcing techniques are only useful when opting for the lowest price goods or services.

This is so false! because negotiations don’t begin until at the end of a bidding process. This starts only after expected service offerings, product specifications and terms of contract has been agreed by both parties. Suppliers who then surpass these criteria are invited to participate in the negotiation process where the pricing is finally being considered.  With e-Auction, products, prices, quality and terms of purchase are clearly visible for all to see and suppliers can get involved in open competition. This process captures in a central location all the information that is needed so every player has equal opportunities to consider these factors before making business decisions.

E-Procurement has a lot more to offer than just competitive pricing – With e-sourcing you are able to get the best value that your money can buy.

  1. E-Sourcing is only used when offering commodity items and products, not services.

eSourcing techniques can be applied in numerous categories across the business world, not just with commodities and products. Services such as, cleaning, laundry and waste removal can be sourced online with significant savings to be realised at the end of the day. Sourcing experts can also identifying new online sourcing categories that might be relevant and specific to your business needs and likewise provide guidance on how best to go about it in order to receive great value for you and your business.

  1. Esourcing does not produce as much significant savings as is often described.

Regarding this particular line of thought, I can only say to you; “Why not try it out and see for yourself”. Too many companies these days no longer worry themselves about controlling her indirect spend because it is natural to regard it to be much smaller in size when compared to direct spend. However, you cannot even begin to imagine the huge amount of savings that can be realized in this category of spend, which includes; office supplies, computer equipment, floor mats,  hangers, display racks for retailers e.t.c. and any other item or supplies that your employees would ordinarily be needing. Smart procurement teams have realized this and are literarily not sparing any expense when it comes to all things procurement on behalf of their organizations. It’s time to get more creative with your company’s sourcing needs both in the direct and indirect categories of spend.

  1. eSourcing technology is a “one-size-fits-all.”
    This is so not true. Every organization’s procurement team have their own goals and tasks set out for them, and this is why a one-size-fits-all ranking being applied to all categories of suppliers is a recipe for disaster. Applying generic ratings to all service providers is usually not a fair and realistic strategy to adopt and practice in the world of esourcing technology. Different providers have their different strengths and service offerings even if they are operating in similar line of business. It is therefore important for the procurer to explicitly define expectations in each procurement exercise that he and his organization embark on. .
  1. Collaboration is not necessary when it comes to improving esourcing initiatives

Under normal circumstances, I’m sure we will all agree that collaboration breeds more creativity and innovation. So why should it be any different with esourcing practices? Decision making normally is a collaborative activity and collaboration with your procurement team and other stakeholders can help you gain tremendous insights that can enable you solve problems much faster and better. Opportunities that lie within collaboration are huge from both the supplier’s and the procurer’s end. Apart from the significant cost savings that can be obtained from economies of scale achieved through collaboration, collaborators also stand a good chance improving their current decision making process and sourcing initiatives by sharing ideas and experiences and also exchanging notes on past practices that have worked out well for them and their respective procurement teams.

Are E-Auctions too Price focused?

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Unless you are one of those who when at the point of making a purchase, especially online would settle for the first and only option you are provided without seeking alternative brands and price offerings, then I don’t think this is a fair question to ask. Given the vast and endless opportunities provided by the internet, procurers will definitely seek out the best options available to them before settling to buy. Although there is more to online procurement than just pricing, negotiating so as to get the least price possible is definitely top priority for any smart procurer.

Online auctions take advantage of the internet to allow procurers arrive at the true market prices for goods and services being sought for. Most online auctions usually go the route of the “reverse auction” whereby  suppliers in a bid to win over customers tender bids that are lower than those of her competitors and this is the practice that seems to make e auctions appear too price focused. This Increased participation for a buyer’s business would naturally drive down the price. Nevertheless, this doesn’t imply that the lowest price will automatically win the bid; modern day auction technology allows the procurer and supplier to consider factors other than pricing. Factors such as quality, brand, reliability, guarantees,  experience, delivery speed, Warranty, volume discount, technical specifications, delivery dates, shipment methods, legal conditions, customer support, financing options e.t.c. All these are additional specifications that buyers can build into their RFQs and present electronically via the internet to an endless list of suppliers.

e- Auction tools are beneficial to both sellers and buyers. In the long term sellers will benefit by seriously pruning down their sales force since most of their sales will be performed online, saving huge staff costs and other incidental costs associated with maintaining a workforce. Likewise in the short term, buyers can immediately experience reasonable savings from online procurement options.

Other Benefits of e-Auctions

The advantages are extraordinary. In spite of the fact that e-auction tools are different based on individual suppliers, e-autions normally permit purchasers to consult with a good number of suppliers and vice versa all at the same time rather than in a sequential order as in physical procurement. This tends to save the procurer and supplier a lot of time and resources. Purchasers taking an interest in the site’s offering possess the capacity to reduce negotiation periods from about two months to as little as two weeks, empowering e-procurement administrators to focus more attention on other projects and tasks rather than a staggering amount of paperwork

Similarly, there is no need any longer for e-procurement managers to spend hours and hours in one-on-one meetings with potential suppliers sometimes even travelling and arguing over contract terms and details.  Instead, a buyer is simply expected to fill an RFQ (of which several e-negotiation platforms already have templates available) that he submits online. Likewise, suppliers are also capable of replying such requests electronically by submitting online proposals that provides detailed information such as price discounts, delivery dates and shipment methods. E-Auction platforms that has e-negotiation features essentially creates a level playing field for all suppliers who are provided the opportunity to compete, as most times e-auction processes are transparent and the results are clearly visible for all to see

It’s now obvious that there are other reasons that drive the demand for e- auctions  other than significant cost-savings, hence it would not be fair to say that e-auctions are too price focused. Unlike online auctions whereby it is the person with the lowest bid that wins, e-auction activities that feature e-negotiation tools is a huge leap towards a much broader seller – buyer online collaborations. In fact there currently appears to be a shift in focus from price based bargains to quality and performance based bargains amongst procurement professionals, so the argument that e-auctions are too price focused no longer hold water.

There’s even more, e-Auction solutions also provide a fair competing ground for all suppliers to compete for business. Buyer’s can deliver RFQs electronically and can even adopt readymade templates with only a few adjustments and likewise suppliers can deliver their proposals to the buyer via the same medium saving both parties a lot of time and resources. These proposals can also be evaluated electronically based on buyer’s specification thereby easily eliminating unqualified applicants saving also time and making sure that only the exact specifications are considered for purchase.

There is no denying of the numerous impacts that e-Auction technology has had, and will continue to have, in this industry. Buyers and sellers are no longer relying on e-marketplaces to just simply play matchmaker. But with huge opportunities at significant cost and time savings, better quality, stronger collaborations, self-empowerment, more functionality, and improved supply chains, e-auctions will continue to be the way to go in the procurement industry both now and in the near future.