Businesses today know that their supply chains are a crucial differentiator and that global strategic sourcing is the foundation for a product’s competitive advantage. Even so, there remain several areas of disconnect between supply chain solutions and sourcing management. Sourcing has remained largely manual because existing software solutions have been clumsy and complicated as well as difficult to integrate with supply chain applications. Using an eSourcing solution in conjunction with a supply chain application improves overall performance. Here are some important ways that supply chain management affects your eSourcing.
Improved Supplier Collaboration
Most suppliers have specialized knowledge about their processes that can and should affect your product design. By working closely with suppliers during every step of the product lifecycle, you can end up with a design that is less expensive to produce, more reliable or that simply provides overall better quality at an acceptable price point.
Working with your eSourcing solution, you can identify key suppliers early in the process — while you still have time to benefit from their expertise. In addition, you can work together to ensure that they have the right capacity and capabilities in regions where you plan to produce your product, so you control logistics costs up front.
Supply chain applications provide visibility into both supply and demand so that you and your suppliers have more time to react to fluctuations or unexpected issues. Better visibility into demand helps suppliers to plan their own inventory and production better, which results in better prices for you. When the supplier doesn’t have to stock excess inventory to cover “just in case” demand and they don’t have to worry about obsolescence or scrap if demand disappears, they feel more confident that their prices don’t have to include the costs of these possibilities. Better visibility results in more open price negotiations and lower overall prices.
More Accurate Supply and Demand
The ability to balance supply and demand is one of the most important attributes of a well-managed supply chain. Accurate forecasts enable companies to create production plans that result in higher efficiency, better equipment utilization and more throughput. Accuracy also enables suppliers to balance their own production processes so they achieve the same benefits. This results in lower overall prices, less safety stock and inventory on hand, reduced premium freight, less expediting and improved logistics – all while providing an increase in on time delivery performance to end customers.
The more openness between the company and its suppliers, the more stable the supply of materials and components will be. Identifying the right suppliers in eSourcing and then providing insight into total supply and demand from the supply chain management solution creates a win/win for the company and its suppliers.
Supplier Performance Insight
Most companies measure supplier performance as part of their supply chain management procedures. Knowing which suppliers provide reliable deliveries and consistent quality helps to ensure that the company doesn’t experience unplanned downtime from poor quality components or unexpected parts shortages. When it comes time to source materials, insight into a supplier’s past performance may be as valuable as the price and delivery they promise.
Supply chain and eSourcing are closely linked. Any organization already achieving excellence in supply chain management will find that performance increases even further with more effective sourcing. By eliminating the frustrating and cumbersome off-line or paper processes that most companies are saddles with, the organization will improve its overall performance and be able to deliver higher quality products on time and at a lower cost.