200711 global sourcing ion

8/3/2019 200711 Global Sourcing ion

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THE GLOBAL eMARKETPLACETM

Global SourcingStrategies to Achieve Long-Term Success

Brandon Spear

Senior Vice President - Operations

[email protected]


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Global SourcingA Fundamental Strategic Objective

What is Global Sourcing?The business process of identifying, evaluating, negotiating andconfiguring supply chains across multiple suppliers and geographies

Common Reasons for a Global Sourcing Strategy Reducing overall cost structure Availability of new technology and capacity. Often domestic

suppliers lack capacity and / or are not making the necessaryinvestments to stay competitive.

Establishing alternative sources of supply reduced risk.

Access to new designs or specialized intellectual capital.

Superior quality. This is typically due to supplier investment intechnology and capacity to attract global business.


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Global Sourcing Strategies

1. Develop and implement a plan

2. Take a multi-country approach

3. Move more spend to Low Cost Countries

4. Develop a plan beyond cost savings

5. Create effective Local Procurement Offices

6. Develop a strategy to mitigate risk


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Global Sourcing PlanA typical approach

1.Recognize

the needfor globalsourcingand LCCopportunities

2. EstablishGlobal SourcingSteeringCommittee(includebusiness unitexecutives)

3.

Understandrequirementsand strategiesof thebusiness units

4. Identifyopportunities toleverage andstandardize on aglobal sourcingprocess

5. Prioritizeopportunities (typicallybycommodityand/orprocess)

6. DevelopLPO andintegratewith crosslocational /functionalcommodity

teams

7. Achieveconsensusandcommunicate globalsourcingstrategies

8. Establish alignedapproaches andprocesses

Procurementsystems

Metrics Teams

9.Executesourcingstrategies asappropriate

10. MeasurePerformance


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Emerging MarketsMulti Country Approach

China is the primary Low Cost Country (LCC)

But near shore countries need to part of strategy

Brazil, Mexico and Argentina are viable markets and

closer to US based companies

Eastern Europe is growing and EU allows for free trade

across borders

A Multi-Country Approach is Leading practice


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Emerging MarketsMulti Country Approach

Brazil, 8%

Argentina, 9%

Mexico, 10%

India, 14%

China, 23%

Poland, 12%

Czech Rep, 14%

China, 19%

Hungary, 10%

USA EU

Weighted preference of top low-cost countries

Accenture Survey 2004


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Financial Benefits

Increasing Procurement Spend in LCC

Leading Companies expect to double the spend volume in LCC over thenext 3 years, from 14% to 28%

Increase in overall savings expected to be ~10%

Benefits Cost reductions averaging 19% from 14% to 28%

Total Cost of Ownership reductions averaging 12%

Downside Inventory Investment increase of3%

Increased Transportation / Logistics cost 2%

Cost reduction benefit is significant


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Moving Beyond Cost

After cost saving companies need to:

Ensure new suppliers will last over time

Help new suppliers to grow with you

Add new suppliers for additional products

How?

Evaluate total value and total cost of global sourcing decisions

Find personnel with worldwide knowledge and skills

Increase visibility of available sourcing data

Enhance knowledge of available global suppliers

Make global sourcing part of overall company operations

Establish a local Procurement Office is Leading Practice


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Local Procurement OfficeCapabilities to achieve success

To conduct effective Global Sourcing, companiesshould establish a Local Procurement Office (LPO)

Step 1: LPO must have these fundamental capabilities:

Supplier Market Research Supplier Identification & Qualification

Savings Opportunity Identification

Quality Inspections

Logistics Planning and Execution

Supplier Database Development

Integration into the procurement organization


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Local Procurement Office ContdCapabilities to achieve success

Step 2: To materialize the saving opportunities the LPO

should have transactional capabilities:

Execute bidding processes

Establish and provide Logistics Management

Procurement transactions

Contract and project management

Invoicing and Payments


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Local Procurement Office ContdCapabilities to achieve success

Step 3: To maximize and maintain saving, the LPO

should have advanced capabilities:

Category management Develop supplier market strategies

Inventory management

Procurement and Sourcing training


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Risk Mitigation

Global Sourcing is not without risks

Lengthened supply lead times

Increased transportation and logistics costs

Supplier delivery concerns

Supplier quality

Intellectual property

Lack of supplier responsiveness

Language issues


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Risk Mitigation (cont.)

Risks are manageable with time and resources

LPOs must work closely with global suppliers

Establish risk mitigation strategies

Dual source with low-cost suppliers (80% to one supplier,20% to another)

Use low-cost supplier and on-shore supplier

Ramp-up supply with new low-cost supplier

Pick the right products for low-cost suppliers Should have high labor cost component to outweigh risks


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Summary

Worldwide competition is increasing Global Sourcing Companies are looking at 31 40% of annual expenditure

China is the primary country but near shore is viable

Brazil, Mexico, Argentina, Eastern Europe

A corporate strategy for Global Sourcing is critical

The LPO is critical to creating and maintaining benefits Must be integrated into core procurement organization


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Questions


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THE GLOBAL eMARKETPLACETM

THANK-YOU

Brandon Spear

Senior Vice President - Operations

[email protected]


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Quadrem can support your program

Global Resources Supplier search in targeted regions

Global/local sourcing teams to help with managing sourcingprocesses

RFQ, RFI, negotiations, spend analysis

Resources to support your LPO

Sourcing and Procurement Tools Electronic RFQ, RFI and negotiation tools available in multiple

languages

Spot buy application to conduct price and availability ch

ecks Global procure-to-pay transaction platform to connect suppliers to

your ERP system

200711 global sourcing ion

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