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Global Sourcing Strategies to Achieve Long-Term Success

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Global Sourcing Strategies to Achieve Long-Term Success Brandon Spear Senior Vice President - Operations bspear_at_quadrem.com Global Sourcing A Fundamental Strategic ... – PowerPoint PPT presentation

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Title: Global Sourcing Strategies to Achieve Long-Term Success


1
Global SourcingStrategies to Achieve Long-Term
Success
  • Brandon Spear
  • Senior Vice President - Operations
  • bspear_at_quadrem.com

2
Global SourcingA Fundamental Strategic Objective
  • What is Global Sourcing?
  • The business process of identifying, evaluating,
    negotiating and configuring 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 necessary investments 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 in technology and capacity to
    attract global business.

3
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

4
Global Sourcing PlanA typical approach
5
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
6
Emerging MarketsMulti Country Approach
Weighted preference of top low-cost countries
Brazil, 8
Argentina, 9
Hungary, 10
Mexico, 10
Poland, 12
India, 14
Czech Rep, 14
China, 23
China, 19
USA
EU
Accenture Survey 2004
7
Financial Benefits
  • Increasing Procurement Spend in LCC
  • Leading Companies expect to double the spend
    volume in LCC over the next 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 of 3
  • Increased Transportation / Logistics cost 2

Cost reduction benefit is significant
8
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
9
Local Procurement OfficeCapabilities to achieve
success
  • To conduct effective Global Sourcing, companies
    should 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

10
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

11
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

12
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

13
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

14
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

15
Questions
16
THANK-YOU
  • Brandon Spear
  • Senior Vice President - Operations
  • bspear_at_quadrem.com

17
Quadrem can support your program
  • Global Resources
  • Supplier search in targeted regions
  • Global/local sourcing teams to help with managing
    sourcing processes
  • 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 checks
  • Global procure-to-pay transaction platform to
    connect suppliers to your ERP system
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