Selecting a right tool for your sourcing activity
Recently we were evaluating various sourcing systems and with varied discussions among the attendees enchanted me to pen down this blog.
Sourcing has become a very crucial process in a procurement life cycle, for a purchaser the organizations goals and direction should be set for placing to determine which services should be handled by others and what to look for in a service provider. These are some the important aspects aligned to the company's purchasing policy, now the question here is using the right tool for your suppliers and the organizations but from an organizational point of view the key goals should be clear enough to justify the coverage of all business requirements from a procurement standpoint.
The key domains that needs to be focused to have a sourcing system beneficial to customers following are important points
1) Defining a clear business objective for global strategic sourcing is a premeditated move as it determines the savings potential from a convincing business case
2) Understanding the culture through research is critical as closing a deal with misunderstandings will not be beneficial and secondly if you understand cultural differences, you might be able to be more demanding of a supplier in another country than you would be in your own country
3) Landed Cost Model in global strategic sourcing, there are more cost components compared to domestic sourcing. A landed cost model helps you include global sourcing cost components such as multi-modal freight, duties, customs fees, and more into your analysis.
4) Defining Incoterms is the responsibility for the buyer and seller in terms of handling and paying for customs and shipping. They also define where the risk of loss transfers between the seller and the buyer
5) A Transportation Time Chart will help the proximity of suppliers influencing transportation times, which influences the inventory strategy. Always know your transportation times.
6) Accurate master Data: All materials both direct and indirect should have material codes created. Any new material to be procured must have material code. This will benefit in reduced sourcing time next time and also give ready data about cost and delivery time and competent suppliers in the market. Sourcing system should take care to have clear reports about material history.
7) Clear rules about self service procurement: sourcing system should be competent enough for getting low cost material procured by user itself without involvement of buyers. Sourcing system must be competent enough to have internal catalogues, External catalogs and process and document flow should be smooth through these interfaces.
8) Sourcing system must comprise bid invitation, auctioning and there must be proper linkage from raising a requirement to calling quotations to auctions to procurement and till payment to supplier. RFQ nature must comprise Public and restricated RFQ's and facility of publishing open RFQ's to company website so that interested suppliers can look into it. This will increase supplier base and good negotiation abilities.
9) Auction portal must be in available technology in the market. All suppliers should be able to participitate without any technical issue.
10) Auction portal must be more flexible to configure and satisfy customers requirement. For eg. There are many clients which demand auction on header price and also need restrication for content on display data to supplier during auctioning. Also auction portal must be more flaexible to configure additional changes if customer want additional fields to be displayed.
11) Timing issue is critical for auctioning. Sourcing system must have database timing and user timing in sync. Also for users located in different countries must have flexibility to bid in their currency.
12) Sourcing system must comprise suppliers as their part. Suppliers should be able to see their required reports, open RFQ's, upcoming auctions, existing PO's, PO details comprising GR's and invoices and Payment status.
13) Data flow between supplier system and user system should be smooth with inbuilt checks like quantity limit, value limit. This will reduce support \ maintenance cost of application.
These are some of the major focus areas that every Sourcing system should comprise, which would be beneficial to procurement managers
